BANKS FACE THREAT OF TAX BOMBSHELL
THE government risks driving droves of companies overseas and losing out on billions in revenues if it goes ahead with imposing a stricter tax regime on the banking sector, the City warned yesterday.
The stark warning from City leaders came as it emerged that the government is considering a sweeping change to the fiscal burden on the banks, including the possibility of a “windfall” tax on profits.
Also being considered are changes to the way the banks calculate their corporation tax contributions, including withdrawing the possibility of firms offsetting their losses against future tax payments.
But Angela Knight, chief executive lobby group, the British Bankers’ Association, said: “This might rake in more tax revenue in the first and perhaps the second year, but what it will have done, at a stroke, is to make the UK a much less attractive location for banks. While it may suit the government politically, the detriment to the UK would be very significant. Why would banks then want to stay here?”
Those comments came as Barclays chairman Marcus Agius warned UK banks risked being put into an uncompetitive position because of tight regulations being imposed on them.
The news comes after public anger over colossal banking bonuses was reignited last week when Goldman Sachs posted third quarter earnings that revealed it is on track to dole out a record $22bn (£13.5bn) in compensation at the end of the year.
A Treasury spokesman said all tax policies are routinely kept under review and that the chancellor would set out his views on tax in the pre-budget report in November. The government is already working on a new tax code with the banks.
Meanwhile, the Conservatives pointed to a speech given by George Osborne at the party conference less than a fortnight ago, in which the shadow chancellor said: “If we find the money that should be going into stronger bank balance sheets is being unreasonably diverted into bigger pay and bonuses, we reserve the right to take further action – and that includes using the tax system.”