Bank levy increases
Government moves to prop up revenues by taxing the bank more
THE GOVERNMENT has increased the levy on banks’ profits to 0.1% in a move to increase Treasury revenue by £800m.
Chancellor George Osborne had originally imposed a reduced rate of 0.05% for 2011 to take into account the uncertain market conditions. However, he said this is no longer necessary as the banking sector is in a stronger position than he believed two months ago.
The increased rate of 0.1% for short-term chargeable liabilities will apply for two months, from 1 March to 31 April, before reverting to 0.075%. Long-term equity and liabilities will be charged at 0.5% for the first two months, reverting to 0.0375% after.
This will increase the revenue from the levy to £2.5bn, the Treasury said. Previously, the forecast for the 2011 yield was £1.7bn. The revenue take for 2012 will be £2.5bn, rising to £2.6bn in 2013 and 2014.
This increase is being announced now, as opposed to at the Budget, to give banks certainty at a time when they are being criticised for the size of their bonuses.