Budget includes extra £1.6 billion bank tax
(10 July 2015 – Britain) Britain’s banks will pay an extra £1.6 billion (A$3.3 billion) to the Treasury over the next five years as part of a special tax on banks’ global balance sheets.
The bank levy will be cut in half over the rest of this parliament, however it will be replaced by an 8 percent tax on annual profits, on top of the corporation tax that lenders already pay.
“It means we’ll actually raise more from the banks this parliament, but at the same time make our country a more competitive place to do business,” said Chancellor George Osborne when he announced his emergency Budget on 8 July.
At the same time, the changes mean that banks with more United Kingdom-focused business, such as Barclays and Lloyds, as well as small challenger banks, will be worse off over the long-term, while banks with large international arms, such as HSBC, which is the biggest payer of the levy, will see its financial burden slowly eased.
Responding to the Chancellor’s Summer Budget, BBA chief executive Anthony Browne said; “We welcome the Chancellor’s decision to amend the Bank Levy to reduce the damage it does to Britain’s biggest export industry.
“But introducing yet another new bank-specific tax will reinforce fears that Britain is becoming a less attractive place for banks to do business.
“This is the fifth new bank-specific tax measure in as many years following fast on the heels of the big rise in March and will increase banks’ tax burden by nearly £2 billion.
“We believe these moves will also undermine competition in the industry by making it harder for smaller players to break through and challenge larger banks.
“We still believe that the Government should conduct a strategic review of the way banks are taxed to ensure that the UK remains a competitive place for banks to do business.”
Since introducing the bank levy in 2010, Osborne has raised it nine times, from the original level of 0.05 percent to its current 0.21 percent.
Under the latest plans, the levy will be cut to 0.18 percent next year, before falling gradually to 0.1 percent in 2020, at which point it will be restricted to UK assets.
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