City slams Europe bank tax

Steve Dinneen
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THE City hit out at plans to introduce a Europe-wide banking levy yesterday after reports the European Union is prepared to go it alone if it does not achieve an international consensus.

A European Union report suggested a levy could raise €50bn (£43bn) a year. The money could either be saved to ward against future economic slumps or used by the individual member states, the option Alistair Darling is thought to favour.

But the head of the British Bankers’ Association (BBA) said plans to impose a European levy would be difficult to implement and could hurt banks operating there.

Angela Knight, head of the BBA, told City A.M.: “If you ask banks if they want to pay more tax, the answer is obviously no. But if there is going to be a tax then we need to examine carefully and sensibly how this can be applied without disadvantaging any jurisdiction in particular.

“Any banking levy would have to be applied on a purely international basis. Most banks in the UK operate across different jurisdictions, with offices in the US and the UK – to introduce a tax in one and not in the other will raise all kinds of issues.

“It is important to remember there is no European power to introduce a tax – all powers of taxation lie with the individual countries. I expect the European Union will support the banking tax but it will still come down to the member states to implement it.”

Prime Minister Gordon Brown said this week the world’s large economies were close to agreeing a global tax on banks. He played down expectations of a deal at the next G20 meeting in June but said he wanted an accord struck at the G20 summit in Seoul in November.