EU: Bank taxes are an uneven playing field
THE UK boasts Europe’s most stringent and wide-ranging bank levy, according to a report by the European Council, raising concerns about “spill-over effects, distortion of competition and relocation of businesses” within the EU.
The report into bank levies across the region, which was written by the General Secretariat for European Council members, also emphasises that the UK tax will hit banks hardest through double taxation because it applies to all the subsidiaries of any bank conducting business in London.
Of all the levies looked at, the UK tax has the widest scope and the greatest potential for double-taxing banks. So far, Britain has secured only one treaty to mitigate the problem, with France.
The lack of a treaty with Berlin means that German banks with total assets worth €626.8bn (£521.3bn), representing over seven per cent of the UK market, could have to pay a levy twice.
And the problem will worsen as more states comply with an EU mandate to apply a levy, as treaty formation lags behind the imposition of taxes.
There could also be distortions resulting from the “potential risk that these levies may influence the flow of business, favouring those instruments that enjoy less tax burden”.
In addition, the report produced an analysis of the impact of the levies on ten banks’ bottom lines. Credit Agricole topped the league, with levies predicted to cut pre-tax profits by 24 per cent, followed by ING at 21 per cent and Danske Bank at 15 per cent.
However, all three banks hotly dispute the numbers. The method for their calculation is not given.