The British government’s tax on bonuses raised more than expected. My view was that the tax would be avoided; instead the banks sucked it up and paid their staff anyway. So the government was wrong as well, in that it expected the tax to change bankers’ behaviour. My worry is still about the long-term. It is fine to clobber the likes of RBS and Lloyds HBOS, where the government has direct equity stakes. It is ridiculous for companies that lose billions to pay out billions in bonuses. But foreign banks are only in London because of the city’s critical mass, and favourable tax and regulatory regimes. They are not here for the weather. a small tax windfall now is scant compensation for a loss in long-term revenues if banks shift more of their operations to New York, Switzerland and Singapore. (Source)

Agree.

On the other hand, what are the overall benefits (long-term) of a huge banking sector, and the associated tax windfalls, when it threatens your whole economy every 50 years or so. Financial turmoil (bailouts, currency crises, bubbles, speculation, sovereign debt default) has always been there. Not just 2008.

The burden of a tax ends up getting shared by consumers (in the form of higher prices inclusive of the tax - ie higher bank fees) and producers (in the form of lower prices net of the tax) regardless of who the tax is placed on from a logistical perspective. In practice, there may not be perfect equivalence, but it’s not really possible to have taxes affect one side and not the other.

G20 ‘agreed’ on coordinated action to avoid capital outflows and tax avoidance. But I am missing it so far.

The face of the world economy is shifting further, slowly.