Concerns raised about bank levy double taxation

Treasury financial secretary Mark Hoban

Concerns have been raised that the government’s bank levy could lead to
double taxation with other jurisdictions.

Detractors say that there is a lack of detail on how the government’s
crackdown would operate alongside the efforts of other jurisdictions collecting
tax from UK-based banks with a presence in their countries.

Financial secretary to the Treasury Mark Hoban unveiled the proposal for a
permanent banking levy earlier today. It is hoped the levy will generate £2.5bn
a year from 2012-2013.

advisers have already warned that the UK ploughing ahead without similar rules
applying in other countries, would disadvantage UK banks compared to foreign
institutions with UK outposts.

The bank levy applies not only to UK banks but also to more than 200 overseas
banks operating in this country, the British Bankers’ Association warned.

In a statement, the BBA said: “Questions are being raised about the UK
proposing to apply tax to a global balance sheet.

“The Treasury’s statement is largely silent on how this levy would interact
with taxation in other countries.

“Until this is clearer, some banks could be taxed multiple times by multiple
jurisdictions on the same activities. There is also no international consensus
on how banking activities should be taxed: the G20 members still hold very
different views.”

The Treasury’s bank levy paper said it remained “of the view that the broad
scope of the application of the levy to UK and foreign banking groups properly
reflects the nature of the risks that the banking sector poses to the UK
financial system and wider economy.”

The UK government’s banking levy will be introduced from 1 January 2011.

Kevin Cummings, tax partner at law firm Berwin Leighton Paisner said: “While
today’s draft legislation is certainly less draconian than was first feared… the
UK banking sector will remain discouraged by the Treasury’s rush to push through
the levy ahead of most of the UK’s international competitors in financial

Even if all countries adopted their own versions of a banking levy, advisers
and academics have said proposals – such as those tabled by the International
Monetary Fund – would be almost impossible to enforce.

Further reading:

plans for bank tax panned by global finance community

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