Britain’s banks will have been hit by an additional 40 billion pound ($62 billion) tax bill by the end of this decade, harming their ability to lend to businesses and create new jobs, an industry lobby group said on Wednesday.
Finance Minister George Osborne said last week that the government would replace a levy on bank balance sheets with a surcharge on profits, but the two schemes will run concurrently until 2020, placing an additional burden on lenders.
The bank levy was introduced in 2011 in response to the financial crisis of 2007-2009, in which RBS and Lloyds were bailed out to the tune of 66 billion pounds, and applies to the global balance sheet assets of British banks as well as assets belonging to the UK operations of foreign banks.
Osborne had faced a balancing act to ensure London remains an attractive place for banks to be based while satisfying public demands that the industry helps pay for the lingering costs of the crisis.
But the constant imposition of extra charges has already drawn the industry’s ire and HSBC, Europe’s biggest bank, has said the levy will be a factor in whether it decides to keep its headquarters in Britain.
The British Bankers Association (BBA) said the latest changes will mean that, between 2010 and 2020, banks will have faced an additional 4 billion pounds a year in taxes, on top of the tens of billions of other taxes that they have paid such as corporation tax.
“Banks expect to pay their fair share of tax. But they are concerned that they are being singled out for new punitive taxes every year,” BBA Chief Executive Anthony Browne said. “That makes it harder for banks … to lend to businesses and create new jobs.”
Banks such as HSBC and Standard Chartered, which have large operations overseas, had said they have been unfairly penalised by the tax.
Osborne said the levy will be gradually reduced over the next few years and will apply only to banks’ assets in Britain from 2020.
The new surcharge will tax banks 8 percent on their profits from next year and is the fifth new bank tax introduced in the past five years.
The BBA said it will be levied on hundreds of banks and customer-owned lenders that were exempt from the bank levy, potentially undermining competition.
($1 = 0.6406 pounds)