A banking industry lobby group in the United Kingdom has faced criticism for allegedly selectively presenting tax data to argue that increasing taxes on banks could undermine London’s position as a leading global financial centre and push businesses and jobs to competing cities.
UK Finance, which represents major lenders including Lloyds, JPMorgan and Revolut, has cited a report prepared by consultancy firm PwC to claim that London has the highest tax burden among five major financial hubs. However, campaigners have questioned the findings, pointing out that the comparison excludes Paris, one of London’s principal competitors in the international banking sector.
The controversy comes ahead of Chancellor John Healey’s budget, scheduled for October 28, in which the government is considering raising taxes on banks to generate additional revenue amid pressure on public finances.
The UK Finance-commissioned report calculates the overall tax burden on a large bank by taking into account corporation tax, social security contributions, value-added tax and sector-specific levies. According to its findings, London has a total tax rate of 46.2%, compared with 42.2% in Amsterdam, 39.1% in Frankfurt, 29% in Dublin and 27.9% in New York.
The banking body has used these figures to warn the government that additional taxes could make the UK less attractive to international investors. In a communication to Healey, it cautioned that higher tax bills could encourage financial institutions to relocate some of their operations and employment to competing markets.
However, calculations conducted by media and reviewed by a leading accountancy firm suggest that a comparable bank operating in Paris could face an overall tax rate ranging from 51.6% to 57.3%. This would be between 5.4 and 11.1 percentage points higher than the reported rate for London, challenging the industry’s argument that the British capital necessarily faces the highest tax burden among competing financial centres.
The exclusion of Paris has prompted criticism from the Trades Union Congress (TUC) and Positive Money, both of which have advocated higher taxes on banks. They have questioned whether the comparison presents a complete picture of the international tax environment and whether the report adequately reflects the taxes actually paid by major British lenders.
TUC general secretary Paul Nowak accused sections of the financial industry of selecting jurisdictions that support their argument against higher taxation. He also argued that the figures did not establish how much tax British banks actually pay compared with their competitors.
Positive Money raised similar concerns over the absence of Paris from the comparison. Its head of policy and advocacy, Simon Youel, questioned whether excluding a major rival financial centre could strengthen UK Finance’s case against a tax increase.
UK Finance, however, defended its methodology, stating that Paris had been considered for inclusion but that it could not establish a reliable, like-for-like figure using the model bank adopted in the report. The organisation also said it had retained the same five cities to ensure consistency across successive editions. It noted that earlier reports had sometimes shown Frankfurt facing a higher overall tax rate than London.
The TUC has called for the government to reverse previous reductions in the bank surcharge, a sector-specific tax on banks’ profits, by increasing the rate from the current 3% to 8%. According to the union’s estimates, the move could generate approximately £2.25 billion annually for the government. Supporters of the proposal argue that banks should contribute more towards public finances after recording substantial profits.
The debate has also exposed differences within the banking industry over the possible impact of higher taxation. Barclays chief executive CS Venkatakrishnan has described the potential financial impact of a tax increase as manageable and expressed support for the chancellor.
In contrast, JPMorgan chief executive Jamie Dimon has warned that further levies could affect investment and employment in Britain. He previously indicated that the bank might reconsider its planned £3 billion London headquarters if the country adopted an unfavourable approach towards the banking sector.
The Treasury has declined to comment on the proposed changes, stating that tax decisions would be announced by the chancellor during formal fiscal events.
