News › Weekly Alert Article
The Bank Levy: A Fair and Substantial Contribution by the Financial Sector?
After the introduction of its Bank Levy at the start of 2011, the UK Government is already proposing a rate increase based on its assessment that the fiscal health of the banking industry may be in better shape than originally perceived. In addition to this, there is international pressure for a turnover tax on banks. Taxand UK looks at the levy and the implications surrounding it.
What is Proposed?
- A levy on banks' balance sheets, which is intended to raise ?2.5 billion a year by 2012.
- The charge would affect banks and building societies with liabilities over ?20 billion. The levy will not be charged on the first ?20 billion of liabilities.
- The rate was originally set at 0.05 per cent for 2011 on the bank's global balance sheet and 0.075 per cent for 2012.
On 8 February 2011, UK Chancellor George Osborne announced an increase in the rate to raise an extra ?800 million of tax revenue, meaning that banks will pay close to ?2.5 billion this year rather than ?1.7 billion, which was expected when the levy was originally proposed.
The levy is seen by many commentators in the UK as part of a strategy by the government to raise taxes on banks. There is clearly a need to balance revenue raising tactics with the UK remaining a favourable and competitive place for UK banks to do business.
Whether the financial sector makes a fair and substantial contribution is not just a matter being debated in the UK. The European Parliament recently voted for a ?172 billion-a-year financial transaction tax to be levied on banks to discourage speculative trading - a so-called "Robin Hood" tax. The German, French, Spanish and Austrian governments are in support of such a tax. Currently the UK Chancellor is not in favour, saying that it is difficult to see how it would work in practice. It would seem there is still a long way to go before a pan-European "Robin Hood" tax is a viable option for raising government tax revenues.
Read the full newsletter from Taxand UK here
Your Taxand contact for further queries is:
T. +44 207.663.0799