Germans back banking levy

 
Steve Dinneen
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GERMAN Ministers will tomorrow throw their weight behind a levy on bank assets designed to raise €1bn (£820m) a year.

The announcement is part of a pact between the UK, German and French authorities to introduce parallel taxes starting in 2011.

The German levy, which will enter a fund used in the event of future bailouts, will only apply to banks headquartered in Germany.

It was not immediately clear how this will fit with legislation announced in June by chancellor George Osborne, which will apply a tax on the balance sheets of banks trading in the UK, regardless of their domicile. This could potentially leave banks such as Commerzbank and Deutsche Bank open to double taxation.

It is understood the tax will apply to banks which post an annual profit, although the levy will not be tax deductible.

The levy will be calculated on a formula comprising two components, the first based on liabilities, minus equity and minus accounts payable to customers. A second component will be based on the volume of off-balance sheet derivatives a bank holds.

The levy would be limited to a maximum of 15 per cent of a bank’s annual earnings.