The UK should reconsider the high rate of tax it charges on banks and financial services firms to boost London’s standing, Deutsche Bank’s UK head said.
Speaking at The City UK’s annual conference, Tiina Lee, who has been in the role for nearly five years, said “the one area to highlight” in regards to the UK’s international competitiveness is tax.
She pointed out that banks in the UK face both a three per cent surcharge and a bank levy on top of corporation tax, which recently increased to 25 per cent.
The equivalent bank levy in Europe is disappearing at the end of the year, Lee noted.
“When one looks long term, rather than what’s going to happen next quarter, [it] is in terms of decisions around where to allocate capital, where to position people and ultimately where to set up new businesses.
“London has suffered a few knocks and Paris is biting at our heels,” she said.
She suggested the bank levy – which is a tax on bank liabilities introduced post-financial crisis – was a “bit of a clunky tool to use”.
“Here we are 15 years on from the financial crisis… is it still fit for purpose?”
Despite the higher taxes and concerns over London’s standing, Deutsche Bank recently recommitted itself to the UK with its £410m takeover swoop of Numis. It said the deal would allow it to deepen its footprint in the UK.
Lee commented the UK is “absolutely investable for us” and represents a “great opportunity for our franchise to really plug into the many small and medium-sized companies whose headquarters are outside of London”.
Regulators and legislators have been searching for ways to boost the City’s standing amid a slew of firms choosing to list abroad.
The Financial Services and Markets Bill, the largest legislative shakeup of the financial sector in decades, is expected to receive royal assent today. As part of the Bill regulators will be mandated to consider competitiveness when making decisions.