October 21st, 2010 
admin George Osborne in the spending review said he wanted ‘to extract the maximum sustainable tax revenues from financial services’; the Treasury expects the levy to raise up to £2.5bn in 2013-14
The Treasury today slapped a £2.5bn a year levy on the banking industry but still left some of the major banks better off as a result of corporation tax cuts being implemented in the next four years.
As the electorate was hit by £81bn of cuts to public spending that will leave the poorest section of society worst off, City minister Mark Hoban issued legislation that made some concessions to the banks after a summer of intense lobbying by the industry. This could even result in the banks paying a lower rate.
Hoban said: “The government believes that banks should make a full and fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.”
The levy will come into force in January 2011 after being announced in the June emergency budget when City analysts calculated that a planned cut in corporation tax to 24% from 28% will negate the impact on the levy and that some banks such as state-backed Lloyds Banking Group and Royal Bank of Scotland could actually stand to gain from the tax changes.
“The levy has been designed to encourage less risky funding and complements the wider agenda to improve regulatory standards and enhance financial stability. It will apply to the global balance sheets of UK banks, and the UK operations of banks from other countries,” Hoban said.
The Treasury spent the summer consulting on a levy that would consist of a charge of 0.04% in the first year – generating £1.1bn – rising to 0.07% in 2012-13 to raise £2.3bn and up to £2.5bn in 2013-14, and it conceded today that it was yet to agree on the actual rate at which the levy would be imposed.
As George Osborne unveiled his spending review he said he wanted “to extract the maximum sustainable tax revenues from financial services”. But, he also made clear he had heeded the industry’s warnings that banks could move overseas if tax changes were too draconian.
“We neither want to let banks off making their fair contribution, nor do we want to drive them abroad,” the Chancellor said during the spending review.
He stressed his bank levy would be more effective than Alistair Darling’s one-off tax on bonuses which brought in £3.5bn of tax receipts or a net figure of £2.3bn – still four times more than the former chancellor had expected after being imposed for just four months starting in December 2009.
The original proposal for the bank levy has been altered after the government listened to responses from 48 interested parties.
The draft legislation published today sets out some of the changes including changing the £20bn threshold at which the levy had been liable. The Treasury is also cutting the levy rate on uninsured customer deposits, while the definition of a banking group has been altered so that if more than 50% a group”s activities are non-financial then it will not be a “bank” ensuring that insurance companies and other such groups are not caught up in the levy.
The levy will be included in the Finance Bill 2011. Banking Spending review 2010 Tax and spending Jill Treanor guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds
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