Once again, an American multinational is finding itself under popular and Parliamentary attack in the U.K. over taxes. Last year it was Starbucks, this year it's Goldman Sachs (GS +1.61%). If the Wall Streeter goes through with bonus-payout plans to avoid a higher tax rate, it could do serious damage to its London book of business.
Oh, the bleedin' drama
Financial Times is reporting that Goldman is toying with the idea of delaying the payout of employee bonuses in its London office to avoid the country's 50% tax rate, which is set to expire April 6. The new rate will be 45%.
Goldman is completely within its rights, and within the law, in doing this, but word of it is causing an uproar. One member of Parliament has already said that if the company acts as planned: "They shouldn't expect any government contracts."
When the wrong thing is the right thing
The U.K. is currently in the grip of self-imposed austerity. As such, the government is scrounging for any source of revenue it can find. Starbucks agreed to pay the outrageous sum of $32 million in voluntary tax last year just to placate a screaming Parliament and public -- both angry that the coffee retailer hadn't paid enough in corporate income tax, even though it too was operating well within the country's current tax law.
Credit Suisse (CS +0.00%) is reportedly going ahead with its plan to pay out employee bonuses in its London office after April 6, but it doesn't seem to be catching the same sort of flak for it Goldman is, seemingly because the Swiss banking giant typically pays out its bonuses after April 6 anyway.
Blatantly unfair as the criticism is, Goldman should cancel its plans to defer paying out bonuses. Goldman is a global bank, and The City is still the epicenter of global finance. As such, it needs to stay in the good graces of the U.K. government there.
I was going to title this piece "Goldman Should Do the Right Thing," but the right thing to do would be to stand up and say "bollocks" to a short-sighted U.K. government; the smart thing to do is just pay the bonuses out at 50%, keep everyone happy, and keep its London book of business intact.
