UK bonus restrictions to boost banking exodus to Dubai

British bankers are likely to accelerate their exodus from the UK to tax havens like Dubai as the government moves to restrict the size of bonus payments which comes after 50 per cent plus tax bills for top taxpayers.

The Daily Telegraph reports: ‘Alistair Darling, the Chancellor, indicated over the weekend that he would pass laws to limit compensation that encouraged risk-taking in the nation’s banks. It follows comments from George Osborne, the shadow chancellor, saying he would ban banks that receive any form of state guarantee from paying large bonuses.

‘The Treasury’s hard line on curbing the executive pay of financial institutions appears to have opened up a rift with the Financial Services Authority, which favours softer guidelines that promote deferred bonus payouts and outlaw multi-year bonuses – enforced with the threat of fines.’

Going offshore

Of course the newly state-owned banks are not going to be in a position to take their operations offshore. But this is going to be an increasingly attractive option for other UK based banks.

Dubai has been constructing a 21st century financial infrastructure in the Dubai International Financial Centre, chaired by ex-HSBC chairman David Eldon. The city now has a regulatory structure modelled on the UK’s FSA and amazing new office buildings whose rent has collapsed over the past year.

But Dubai would never think of interfering with executive compensation in the way that socialist Britain is now proposing. Nor is there any personal income or capital gains tax. For bankers who earn, save and invest this is a very attractive proposition.

New metro

A couple of years ago several major banks rejected the idea of relocating to Dubai because the city was choking under the strain of a runaway boom. That is not the case today and the roads are clear, and a new metro opens on time next month.

With a tube to commute on and even a local edition of the Financial Times, bankers might well choose in the near future to enjoy their bonuses tax-free in Dubai rather than face the envy penalty of anti-capitalist Britain.

Countries that forget who makes the money are usually heading for history.