London's bank tax rate higher than rivals, report claims

London faces a total bank tax rate of 46.2%, making it the most tax-intensive city among several global financial centres, according to a report commissioned by UK Finance and compiled by PwC. This rate is higher than those in Amsterdam (42.2%), Frankfurt (39.1%), Dublin (29%), and New York (27.9%). The findings have been used by UK Finance to argue against proposed tax increases for the banking sector.

Exclusion of Paris questioned

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However, campaigners have raised concerns that the UK Finance report's data is misleading due to the omission of Paris, a significant rival financial hub. Calculations by The Guardian, reviewed by an accountancy firm, indicate that a comparable bank in Paris would face a total tax rate ranging from 51.6% to 57.3%. This would place Paris between 5.4 and 11.1 percentage points higher in tax burden than London.

UK Finance stated that Paris was not included because a "robust like-for-like figure using the report’s model bank" could not be produced. They added that the five cities included have remained consistent to support year-on-year comparisons. Campaign groups, including the Trades Union Congress (TUC) and Positive Money, have criticised this exclusion, suggesting it is a deliberate attempt to bolster the argument against higher bank taxes.

Calls for increased taxation

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Paul Nowak, general secretary of the TUC, described the lobby group's data as a "misleading attempt to make the case against fair taxes." He argued that the report "tells us nothing about the actual taxes paid by Britain’s big banks, which are likely far lower than many competitors." The TUC has proposed increasing the bank surcharge, a specific tax on the industry, from 3% to 8%. They estimate this change could generate £2.25 billion annually.

Simon Youel, head of policy and advocacy at Positive Money, questioned whether Paris was "cynically omitted to allow the report’s sponsor, UK Finance, to claim that the City contributes more tax than any other global financial sector." He urged Chancellor John Healey to see through the lobbyists' arguments and consider raising taxes on banks, as other countries have done.

Industry reactions

Responses from banking leaders have varied. CS Venkatakrishnan, chief executive of Barclays, has indicated that a tax increase would be "bearable" and offered the chancellor his "full support." In contrast, Jamie Dimon, chief executive of JP Morgan, previously warned in May that the bank might abandon plans for a new £3 billion London headquarters if the UK became "hostile" to banks. Dimon had met with officials to discuss concerns that further levies could jeopardise investment and jobs.

A Treasury spokesperson stated that decisions on tax are a matter for the chancellor and that the department does not comment on speculation.