David Prosser: Plenty more headroom on taxing the banks
Friday 22 October 2010
Outlook Just as the Chancellor promised, the legislation paving the way for the new levy on banks' balance sheets was published yesterday – and, just as he promised, the charge is designed to extract the "maximum sustainable tax revenues" from the City.
Just one problem – there is no agreement on what "maximum sustainable" means. Mr Osborne's view – that an annual take of £2.5bn is as much as he can get away with without driving banks abroad – is right at the bottom end of the range of suggestions. Compare it, for example, with the demands of the Robin Hood Tax Campaign, which is at the other extreme, with a call for a newannual tax of £20bn on the City.
Let's say this for the Chancellor – his desire to keep the banks in Britain is not going to be thwarted. When this levy was first unveiled six months ago, the banks breathed a sigh of relief. And since then they have secured some additional concessions such as a lower tax charge on savers' deposits on their balance sheets, even where these deposits are not covered by a state-backed compensation scheme.
So relaxed is the British Bankers' Association about the new charge that its only criticism now is that British institutions might be caught out by double taxation, as other countries introduce their own levies. If that is the worst of the banks' complaints, it seems safe to say that Mr Osborne could have been braver.
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