The TUC has this week published a report calling on the government to make pay and bonuses above £262,000 liable for corporation tax.
Using data from the Labour Force Survey, Bonus Season shows that 36 per cent of employees earning more than £250,000 a year in the UK work in banking and finance.
Relying on figures from Her Majesty’s Revenue and Customs, it then shows that just over 80,000 people in the UK have incomes of over £262,000 (10 times average annual earnings) including 29,000 people in banking and finance.
Ending corporation tax relief on earnings over that figure in the banking and finance sector would raise £1.7 billion a year - vital revenues towards paying back the deficit created by the financial crash, says the TUC.
The report also estimates that extending the scrapping of corporation tax relief for top pay and bonuses over 10 times average earnings to all UK companies would raise around £5 billion a year.
With the government effectively cancelling out its own levy on bank balance sheets by cutting the rate of corporation tax from 28 per cent to 23 per cent by 2014, the banking and finance sector is no longer making a proper contribution towards paying off the deficit it played a key role in creating, says the TUC.
The fact that banks are back recording big profits and handing out billions of pounds in bonuses proves they can easily afford a new tax on big bonuses, says the TUC.
It believes that applying corporation tax to earnings which are over ten times the average would not only raise revenue but also tackle growing pay inequality by encouraging companies to spread pay across the workforce, rather concentrating it on those at the very top.
As well as calling for top pay to be liable for corporation tax, the TUC believes the following changes would help tackle the growing pay divide between top executives and the rest of the workforce:
- Bring a much-needed dose of economic reality to executive pay decisions by introducing worker representation on to remuneration committees
- Make executive pay more transparent by publishing the ratio between top pay and both median company workforce pay and the lowest paid members of staff
- Tackle the closed shop of non-executive directorships by forcing companies to advertise positions externally
- Ensure that rates of pay increase for directors reflect those of other employees, with an explanation given in the remuneration report, when this is not done.
To read the report in full, go to the Trades Union Congress website