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According to research by Selby Jennings, the financial recruitment specialist, senior bankers still typically earn twice as much after tax in London than in rival financial centre Geneva. This is despite the new 50% tax rate for workers earning more than £150,000 per annum which came into force this April.
Even for mid-level investment banking roles, such as quantitative analysts and junior traders, bankers will still earn between 20-25% more in London than in Geneva after tax.
The research suggests that far fewer London-based bankers are likely to decamp to Geneva because of tax rises in the UK than had been feared.
Adam Buck, Managing Director at Selby Jennings, comments "Geneva and Zurich are relatively small financial centres compared to London. In reality there are relatively few senior banking roles in Switzerland paying over 150,000 Pounds. London and New York are the only markets large enough to offer those roles in any significant quantity."
"Bankers earning enough to be caught by the 50p tax rate will find far fewer job opportunities in Switzerland compared to London. It's a very competitive jobs market with employers having a large number of good candidates to choose from. If anything an influx of candidates will hold back pay growth in Geneva and allow London to pull further ahead."
Buck added "Switzerland has a competitive advantage in some wealth management and commodities roles, but in many of the highest paying jobs, across the rest of global and capital markets, London is some way ahead of Switzerland."
Selby Jennings says that because bankers in London are usually paid considerably more than their counterparts in Geneva, UK taxes would have to be significantly higher to justify moving to Geneva on financial grounds.
Adam Buck went on to say "these figures suggest that London based bankers are unlikely to decamp en masse to Geneva as a result of the new 50p tax rate. Despite the UK's increasingly punitive tax regime, the highest paid bankers will still be significantly better off working in London."
"The floodgates may not be open just yet, but London's competitive advantage over rival financial centres is narrowing. The new Government will need to keep a tight rein on banker-bashing and resist further tax rises on high earners if the UK financial services sector is to thrive."
Peter Goodman, Partner at accountants Wilkins Kennedy, comments "the introduction of the 50p tax rate in April means that some high earners in the banking sector will be paying almost 50% of their total income in tax and National Insurance. The National Insurance increases scheduled for next year will see many high earners in the financial services sector actually paying more in tax to the Government than they take home in pay." The highest paid bankers in Geneva will pay marginally less of their income in tax (41%), according to calculations by Swiss accountancy firm, Revitrag Treuhand.
"The recent Gaines-Cooper ruling makes moving to a financial centre like Geneva to escape the UK tax net increasingly difficult. To gain any kind of tax advantage, you would effectively have to exile yourself, which for the majority of people who have family and friends in the UK, is not an attractive option."
Peter Kraus of Swiss accountants Revitrag Treuhand says "there is a perception that Geneva is a low tax jurisdiction, but until recently taxes were almost as high as in London.â€?