UKs 50% bonus tax to unfairly penalise US banks: JPMorgan chief

Written by Bloomberg | Updated: Dec 31 2009, 04:58am hrs
JPMorgan Chase & Co chief executive officer Jamie Dimon told UK chancellor of the exchequer Alistair Darling that his 50% tax on banker bonuses would unfairly penalise the US bank, a person close to the firm said.

Dimon, 53, mentioned plans to build European headquarters in Londons Canary Wharf for 1.5 billion ($2.4 billion) as an example of the New York-based companys commitment to the city, the person said. JPMorgan is considering dropping the Canary Wharf plans because of the bonus tax, the Financial Times reported on Tuesday, citing an unidentified bank executive.

In the call to Darling, Dimon reiterated that the bank, the second-biggest US lender by assets and deposits, paid British taxes and didnt take a UK taxpayer bailout, the person said, declining to be identified because the conversation was private.

The telephone call was made after Darling on Dec 9 imposed a 50% tax on discretionary bonuses greater than 25,000 at all banks operating in the UK. The tax, which the Treasury says will raise more than 550 million , covers about 20,000 people in the UK.

The Dimon phone conversation with Darling was reported on Monday by the London Telegraph. JPMorgan spokesperson David Wells declined to comment. A UK treasury spokesperson on Monday defended the tax as fair because it would apply to all banks and said he couldnt confirm the telephone conversation.

Financial firms are threatening to leave the UK as increased taxes and regulation make London a less attractive location. Tullett Prebon Plc, the inter-dealer broker, said it will help employees depart following the governments decision to put a 50% tax on bankers bonuses.

BlueCrest Capital Management Ltd, a London-based hedge fund firm that oversees about $15.4 billion, plans to open a Geneva office, a person familiar with the situation said last month. As many as 50 of BlueCrests 300 employees in London may move, the person said.

Deutsche Bank AG chief executive officer Josef Ackermann said on Dec 12 that Germany has a comparative advantage over other financial hubs because it doesnt plan to tax bonuses. The bank said it plans to spread the costs of the UK bonus tax to all employees worldwide.

The UK Treasury is working with banks to identify employees who are excluded from the tax, and Darling said Dec 16 he will resist calls to change the policy. He suggested banks complex operations wont allow them to escape the levy by arguing that some activities arent defined as banking.

JPMorgan paid 237 million in November 2008 to acquire land in Londons Canary Wharf financial district to build a 1.9 million square foot (176,500 square meter) tower.

Under the agreement with Canary Wharfs owners, who will build the offices, JPMorgan can scale back the size of the project. The planned headquarters will house JPMorgan employees from seven other buildings after the bank scrapped plans to build a new office in Londons main financial district.