LONDON: George Osborne has said that the bank levy, expected to raise more than £3bn next year, is to become a permanent fixture of the British tax system.
The chancellor rejected suggestions by Andrew Tyrie, the Conservative chairman of the Commons Treasury committee, that the levy should be scaled back as banks became less dependent on an implicit state guarantee. Mr Tyrie said Mr Osborne’s decision to raise the bank levy in this month’s Budget — with the aim of raising another £900m a year from the sector — appeared to “break the link” between risk in the sector and the tax.
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Mr Osborne denied that such a link had ever existed. “The reason for the bank levy is to create a safer banking system but also explicitly to raise revenue,” he said
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. The chancellor told MPs the levy, which falls most heavily on HSBC, was introduced in 2010 as a replacement for Labour’s bank bonus tax because it was “a more effective way of getting the banking sector to make a contribution”.
Mr Osborne said: “I think the bank levy is here to stay.”
The BBA, the trade association, said banks already pay more than £40bn in tax and the rise in the levy would damage the UK’s competitiveness.
“The bank levy imposes a significant cost on banking businesses in the UK, which is making many banks move work and jobs to other parts of the world, and is deterring international banks from investing in the UK,” said Anthony Browne, the BBA’s chief executive.
“This will also further disadvantage UK headquartered banks by increasing tax on their overseas activities, while their competitors in those markets do not pay this tax at all.”
The tax reflects a cross-party consensus that the lenders, blamed at Westminster for sowing the seeds of almost a decade of recession and sluggish growth, still have an obligation to society to pay higher taxes.
When he introduced the bank levy in his emergency Budget in 2010, Mr Osborne explained that the tax on bank balance sheets would be introduced simultaneously with the governments of France and Germany.
