LONDON (Reuters) - Bank of England Governor Mervyn King criticised Goldman Sachs on Tuesday for considering a delay to paying bonuses until after a cut in Britain’s top income tax rate in April.
King’s intervention ratchets up the pressure on Goldman (GS.N), which sparked a furore last week when it said it might delay bonus payments to staff in Britain until after April 6, when the top rate of income tax falls to 45 percent from 50 percent.
“I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of the lower tax rate,” King told a panel of MPs when asked about Goldman’s plan.
King said that while Goldman’s plan was not unlawful, the tax reduction was being done at a time when the rest of society was suffering from the consequences of the global financial crisis.
A spokesman for Goldman declined immediate comment.
Britain had to shore up and nationalise banks during the 2007-09 financial crisis, sparking public anger over bonuses at a time when the government is freezing public pay and cutting expenditure.
Chancellor George Osborne, who introduced the reduction to the top rate of tax, has come under pressure from tax campaigners to prevent banks such as Goldman from avoiding tax by delaying their bonuses.
King, who has a salary of 305,000 pounds a year, told parliament’s Treasury Select Committee it was “clumsy” to pay bonuses in such a way and betrayed a lack of attention to how others might feel.
“And in the long run, financial institutions, like all large institutions, do depend on good will and the rest of society. They can’t just exist on their own,” King said.
Goldman’s plan touches on two sensitive issues that have triggered public anger in Britain: the size of bankers’ bonuses and why large international firms like Starbucks (SBUX.O) and Amazon (AMZN.O) have been able to pay so little UK tax in recent years.
Goldman’s strategy relates to bonuses that were deferred from 2009 to 2011, a person familiar with the bank’s operations told Reuters on Sunday.
The bank recently brought forward payments of deferred stock to executives in the United States to 2012 to beat tax hikes implemented for top earners this year.
Reporting by Huw Jones; Editing by Guy Faulconbridge and Mark Potter