Government publishes draft legislation on bank levy
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Mark Hoban, financial secretary to the Treasury, has announced the publication by the government of draft legislation on the bank levy, which was announced in the June Budget.
Following consultation with industry over the summer, the draft legislation and accompanying consultation response sets out the details of how the levy will work ahead of final legislation, which will be published before the end of the year.
The levy is intended to encourage banks to move to less risky funding profiles. It is expected to generate around £2.5bn of annual revenues by 2012-13 and will be permanent.
The government believes that banks should make a full and fair contribution in respect of the potential risks they pose on the wider economy.
The design of the levy is based on the proposal in the International Monetary Fund Report to the G20, A Fair and Substantial Contribution by the Financial Sector, for a broad balance sheet charge.
Hoban, says: “We have consulted on the design of the scheme so that it achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.
“Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long term debt and equity, working with the grain of our wider reform programme.”
A spokesman for the British Bankers Association says the banks are committed to playing their part in restoring the UK economy - and that includes helping to meet the greater demands on the Exchequer.
He adds: “The banking industry paid more than £26bn in taxes last year and the bank levy will increase this figure. We will work with the Treasury to ensure the final levy also meets the aim of maintaining the UK’s position as the world’s financial centre while generating additional tax revenues.
“This bank levy applies not only to UK banks but also to the more than 200 overseas banks operating in this country. Changes to the detail have been made during the consultation period but inevitably the levy will have a significant impact.
“Questions are being raised about the UK proposing to apply tax to a global balance sheet. The Treasury’s statement is largely silent on how this levy would interact with taxation in other countries. Until this is clearer, some banks could be taxed multiple times by multiple jurisdictions on the same activities. There is also no international consensus on how banking activities should be taxed: the G20 members still hold very different views.”
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