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Foreign Exchange

London to Singapore, by tax

No matter how much we’re paid, most of us are reluctant to allow the taxman to lift more than half of our earnings directly from our pockets. Throw in a special tax on bonuses, which may or may not be a one-off, and the 50p top-rate income tax levied by the UK’s Chancellor of the Exchequer Alistair Darling is certain to make people wonder if they may not be better off somewhere else.

Despite a lot of noise, we haven’t seen much of an exodus as yet. But if it does, plenty of people think it might be the foreign exchange market that heads the queues at Heathrow and City airports.

FX is increasingly automated: it doesn’t involve the same level of client meetings as, say, debt capital markets. In effect, it doesn’t really matter where the sales and trading teams sit, as long as your key time zones are well covered.

One senior FX banker I chatted to this week said the threat to London was overestimated. But before Darling & Co become complacent, they should listen to the reasons why.

First, said banker over lunch, forget other supposed regional centres such as Paris and Frankfurt. They’ll have the same regulatory and tax regimes as anywhere else in mainland Europe.

Forget, for the most part, Dubai. A few people have gone out there. If you like sunshine and don’t like paying tax, it may be the option for you. But the personal and family upheaval outweighs those positives by a long way. You’re more likely to bump into a Football Wag contemplating her marital status than an FX trader when you’re standing in the long shadow of the Burj Khalifa.

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