BUDGET: Govt to hit banks with £2bn annual tax

22 June 2010 0:00 am | Updated: 22 June 2010 1:11 pm | By Lee Jones

In the emergency Budget today, Chancellor George Osborne revealed that all banks, building societies and non-UK banks operating in the country will be taxed with a new bank levy.

Osborne says the levy, which is also be introduced by the French and German governments from January 2011, will bring in around £2bn a year.

He says: “It is fair and right that the banking sector have more appropriate contributions. We must remember this crisis started in the banking sector.”

The smallest banks and building societies will not be affected by the levy. The levy will also be reduced for those banks holding more tier 1 capital and longer dated debts.

Osborne also revealed the Government is exploring the possibility of an additional financial activities tax.

PricewaterhouseCoopers financial services tax partner Peter Maybrey says: ”We are concerned that the proposed bank levy may have an adverse impact on the competitiveness of the UK as a financial services centre - in particular if the UK imposes the levy in advance of other major territories such as the US.  

“Other territories, whose banks have not been as adversely affected in the financial crisis, are likely to resist bringing in a similar levy. Canada, Australia, Japan and Switzerland may fall into this category.  This could lead to a migration of business activity from the UK to such other territories which either do not impose a levy or impose one at a lower rate than the UK.”

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