Treasury unveils bank levy

The bank levy is designed to raise £2.5bn a year by 2012, slightly more than the Labour Government’s one-off bank bonus tax achieved.

The Treasury Financial Secretary Mark Hoban said the scheme would ensure that “banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy”.

But the British Bankers’ Association said it would have a significant impact on the 200 foreign banks operating in the UK.

“Questions are being raised about the UK proposing to apply tax to a global balance sheet. The Treasury’s statement is largely silent on how this levy would interact with taxation in other countries. Until this is clearer, some banks could be taxed multiple times by multiple jurisdictions on the same activities.”

The June Budget showed the levy would be charged at a lower rate of 0.04 per cent in the first year, generating an expected £1.15 billion.

This would rise to 0.07 per cent – or £2.3 billion in 2012/13 – and up to £2.5 billion in 2013/14.

The Treasury said these details were still being finalised.

‘Pathetically small amount’
TUC general secretary Brendan Barber said: “This is a pathetically small amount to demand from the banks.

“Ministers have come up with the smallest number that they think they can get away with, even though the banks are carrying forward £19 billion of tax losses to offset against future tax bills – losses that have been bailed out by the taxpayer.”

Experts are predicting that UK bank bonuses will reach around £7 billion this year, signalling a recovery since the credit crunch.

But with banks, such as HSBC and Standard Chartered, signalling that they might be prepared to leave the UK, the Government knows it has to tread carefully.

In his spending review statement yesterday, the Chancellor George Osborne said: “We neither want to let banks off making their fair contribution, nor do we want to drive them abroad.

“Many hundreds of thousands of jobs across the whole United Kingdom depend on Britain being a competitive place for financial services.

“Our aim will be to extract the maximum sustainable tax revenues from financial services.”

‘The Big Five’
“The Big Five” British banks – Barclays, HSBC, Lloyds, RBS and Standard Chartered – made £15 billion in pre-tax profits in 2009. But their assets, made up of loans to countries, businesses and individuals, amounted to £6.8 trillion. It is these assets that will be targeted when the levy is introduced.