Belfast Telegraph

Friday 25 July 2014

Britain's banks face £2.5bn levy

Britain's banks will pay an extra £2.5bn in tax a year by 2012 under draft legislation published in a Government move to repair some of the damage caused by their role in the financial crisis.

The levy will apply charges to the global balance sheets of UK banks and the British operations of foreign firms, the Treasury said.

Unveiling the legislation, Mark Hoban MP, financial secretary to the Treasury, said the levy would not just raise money but "encourage less risky funding".

He said: "The scheme achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.

"Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long-term debt and equity, working with the grain of our wider reform programme."

The levy will replace the Labour Government's one-off bonus tax introduced earlier this year, which charged 50% on all windfalls above £25,000 - raising over £2bn.

The draft legislation said the Treasury would have the power to offer tax relief to those banks that faced double taxation, because they operate in other countries where the levy applies.

But the British Bankers' Association warned the levy would have a significant impact on the more than 200 overseas banks operating in the UK.

It said: "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.

"There is also no international consensus on how banking activities should be taxed - the G20 members still hold very different views."

TUC general-secretary Brendan Barber said the levy amounted to a "pathetically small amount to demand from the banks".

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