- Title: UNITED KINGDOM/FILE: Britain announces levy on banks operating out of UK
- Date: 22nd October 2010
- Summary: LONDON, ENGLAND, UK (FILE) (REUTERS) LLOYDS TSB HIGH STREET BRANCH SIGN HSBC BRANCH HSBC SIGN
- Embargoed: 6th November 2010 12:00
- Topics: Finance
- Reuters ID: LVA8SN8FUWYY5F3ZUEX46Z1MJXV3
- Story Text: Britain's coalition government announces a 2.5 billion pound bank levy, which the industry fear could see financial institutions taxed twice and drive them away from the UK.
Britain said it expected to raise about 2.5 billion pounds ($4 billion) a year by 2012-13 from a permanent tax on British and overseas banks' balance sheets.
Britain has introduced the tax saying banks should make "a fair contribution" to the potential risks they pose to the financial system and to encourage them to move to less risky funding.
"We understand the anger that people are feeling over the contribution that the banks have made. That's why we are encouraging the banks to lend more, to get the recovery going. That's why it's right that they should pay this levy and that's why we're also looking to tackle the bonus culture and the banking system too," he said.
The amount to be raised is in line with a forecast made when the levy was announced in the budget in June.
The government has now published draft legislation on a levy which will be phased in from the start of next year.
Hoban said the government had to be careful not to charge the banks too much, or they would scare them away from the UK.
"We are in a competitive environment. Banks can move, they have threatened to move. You know, I am not here to defend the banks, nor am I here to condemn them. We think this is a fair levy, it's on top of the other taxes that they pay, it's an important contribution towards tackling the budget deficit and it is the right thing to do," said Hogan.
Changes to the details have been made during a consultation period, but the British Bankers' Association (BBA) said the levy "will have a significant impact" on overseas banks.
It said more clarity is needed on how it will interact with taxation in other countries.
Angela Knight, Chief Executive of the BBA, said the government must get the new levy into double taxation treaties, "So we don't have international banks operating in multiple jurisdictions, being taxed multiple times for the same thing. So there are some critical areas which are yet to be resolved," she said.
Unveiling 80 billion pounds of spending cuts on Wednesday, finance minister George Osborne ratcheted up the rhetoric on banks, pledging to seek the "maximum sustainable" revenue from the financial sector.
The British government said it would work with international partners to explore the merits of a Financial Activities Tax on profits and remuneration.
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