“Punitive” taxes aimed specifically at banks have dented the industry to the tune of tens of billions of pounds, according to the British Bankers’ Association (BBA).
In a stern statement, the financial services trade association said that over the past decade, UK governments have introduced some £40bn in additional, bank-only taxation.
By 2020, the BBA stressed, banks will have to contend with an additional £4bn a year in taxes on top of a host of levies they already pay – such as corporation tax, employment taxes, irrecoverable VAT and business rates.
Indeed, the BBA points out, George Osborne’s recent Budget introduced a further tax that is payable only by banks. This was an 8% bank corporation tax surcharge that amounts to the fifth new sector-specific measure introduced in as many years.
Despite the chancellor’s announcement of several reductions to the bank levy over the coming six years, the lobby group said, his Budget will still add a further £1.7bn of tax to the banking sector over the same period.
While the levy was paid by 30 banks, the BBA warned, the new tax will apply to hundreds.
“Banks expect to pay their fair share of tax,” said BBA chief executive Anthony Browne, “but they are concerned that they are being singled out for new punitive taxes every year. This makes it harder for banks – the UK’s biggest export industry – to lend to businesses and create new jobs.
“The new bank corporation tax surcharge will undermine competition by creating an additional new tax for lots of smaller banks.”
Browne added: “While it is good that the government wants to amend the bank levy so that it no longer penalises global UK banks, these changes will not come into force until 2021, under the next government. This has led some to question whether they can believe that this reform will ever actually come into force.
“Banking is one of the most globally mobile businesses – that is why we would like the UK government to hold a strategic review of bank taxation to ensure we remain competitive.”
But in the wake of the comments, financial services minister Harriett Baldwin refuted the total scale of the levies and argued that the surcharge would make a difference.
Speaking at an event hosted by lobbyists The City UK, she said: “These changes will leave all our banks, including challenger banks and building societies, with a rate of corporation tax lower than in every other G7 country.”
Baldwin added that she recognised the value of spurring new market entrants to launch – and revealed that a pair of leading UK watchdogs, the Prudential Regulation Authority and the Financial Conduct Authority, will set up a ‘New Bank Unit’ dedicated to those very start-ups.
Baldwin hinted that the unit would shepherd prospective new banks through their early-stage development en route