Banks Say Healey Planning Budget Tax Raid on Profits
BBC News reports that senior banking executives expect the sector to be targeted in the upcoming Budget, scheduled for two weeks from now.
John Healey, while acknowledging banks as "part of the crown jewels" of the UK economy, has not ruled out a tax raid. The largest four banks collectively realized around £15 billion in profits during the first half of this year, sparking calls from trade unions and others for additional levies.
The banking sector's trade body, UK Finance, warns that further increases in bank taxes could:
- Weaken competitiveness.
- Discourage investment and job creation.
- Work against the government's growth objectives.
Currently, the UK's biggest banks and building societies pay a 3% surcharge on top of the standard 25% corporation tax rate, plus an asset-based levy. Last year, the sector contributed nearly £40 billion to the Treasury, including income tax on employees.
There are several potential avenues for the chancellor to extract more funds from the sector:
- Reinstating the 8% surcharge on banks, reduced to 3% under Rishi Sunak.
- Adjusting the bank levy, currently charging 0.1% on short-term loans and 0.05% on longer-term loans.
- Implementing a moratorium on tax offset practices, which could yield an additional £1 billion annually.
However, any tax increase must consider the impact on foreign banks operating in the UK, as highlighted by Jamie Dimon, CEO of JP Morgan, who emphasizes the UK's already high tax burden on banks globally.
Bank executives believe the chancellor's Budget will present a significant test of the government's support for the UK banking sector.