LONDON (Reuters) – Britain risks driving banks overseas if current high levels of taxation on the industry are maintained after Brexit, a bank lobby group said on Wednesday.
FILE PHOTO: People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson
Banks in London have already begun to make plans to move staff abroad ahead of Brexit, which will make it more difficult for them to do business in the European Union from Britain.
UK Finance, which represents the country’s finance sector, has published research showing a typical bank in London has a higher tax burden than in rival international financial centres.
The research, by consultancy PwC, found a bank in London faces an effective tax rate on profits of 50.6 percent, compared to 43.8 percent in Frankfurt, and 34.2 percent in New York.
Singapore and Dubai had the lowest tax rates, at 23.2 percent and 22.7 percent respectively.
Stephen Jones, chief executive of UK Finance, urged the UK government to “rethink” bank taxation policies to ensure the overall competitiveness of the UK as a global financial centre is maintained post-Brexit.
“At a time when domestic and international events are forcing many banks to restructure their global operations, it is important to consider the UK’s competitiveness relative to other leading financial centres,” he said.
“This report shows that the UK’s tax competitiveness has been substantially eroded relative to other financial centres to which globally mobile corporate and investment banks based here could relocate.”
Finance firms in the City of London have become increasingly frustrated at the government’s handling of Brexit, with only limited access to the EU market left on the negotiating table and a highly disruptive “no deal” exit still a possibility.
The finance industry is Britain’s largest taxpayer, responsible for more than a tenth of all tax receipts. Finance firms paid a record 75 billion pounds in taxes in the last financial year.
Any move to cut bank taxes would likely be politically unpopular because of widespread mistrust of the City of London financial services industry after banks had to be bailed out by taxpayers in the 2008 financial crisis.
Banks face higher taxes than other firms in Britain, after an additional corporation tax surcharge and levy on assets were imposed after the crisis.
The UK Finance report found banks contributed 36.7 billion pounds of the City’s overall tax haul in the last financial year to March 2018, up 1.3 billion on the previous year.
Reporting by Iain Withers; Editing by Huw Jones and Jane Merriman