No value in bank VAT charge

CHARGING BANKS VAT would not significantly increase the tax take from the sector – instead it could lower receipts, according to new research.

The study by professor Ben Lockwood of the University of Warwick, undertaken with PwC, showed that subjecting banks to VAT would potentially create a minor net increase in tax collected.

If EU banks were subject to VAT, they could recover the VAT on their costs. Banks’ business customers would be charged back which could be reclaimed, so the only potential increase would be through charging VAT on consumers.

It is unlikely that governments would make much more tax, the report finds, with some of its analysis pointing to a net loss for EU tax revenues.

“The conclusions are based on national income data from 26 (out of 27) EU member states and, while the study makes a number of assumptions, it does not support a view that imposing VAT on banking services would significantly increase VAT revenues,” said professor Lockwood. “In fact, it could even decrease them.”

Related reading

Life Belt with Computer Folders