US banks rethink how they do business with UK under Osborne's new tax regime

Click to follow
The Independent Online

It was polite – more polite perhaps than the good folk of JPMorgan Chase can usually manage – but the warning was forceful and insistent, nonetheless. The UK's new tax regime for banks will make Goldman examine how much business it does in the country in the future.

"We take all things into consideration," David Viniar, the Goldman Sachs chief financial officer said yesterday, after setting out the $600m (£390m) hit that his bank had just taken from the British levy on bonuses. When it comes to taxes, he said, "whether they are consistent across jurisdictions is a consideration, or whether they are higher in one place than another; whether they are one-time only is a consideration, or whether they are ongoing."

And he added that the company will be trying to "constructively engage" with the Government, as it would in any country in which it operates, and with how taxes affect economic activity, how they affect the financial services sector and how they affect Goldman itself. But he stopped short of making any threats. "London is a very important place to do business. I would expect we'll continue to do business there."

Goldman's $600m bonus tax bill eclipses the $550m announced by JPMorgan Chase last week, and the money keeps rolling in from overseas banks operating in the City of London. Bank of America Merrill Lynch reported a charge of $425m, Deutsche Bank reported in its first-quarter earnings that it had paid €120m to the Exchequer. The Treasury says it expected to collect £2.5bn from the one-off 50 per cent levy on bank bonuses in excess of £25,000 granted between last December and April this year. And in the emergency Budget after the general election, the coalition announced a permanent bank tax, levied on bank balance sheets from next year, to raise £2bn annually.

Successive governments' anti-bank stance and the rising rates of personal tax on high-earners in the UK are behind what is believed to be an increasingly tense stand-off over JPMorgan Chase's planned new headquarters at Canary Wharf in London. The bank is reportedly reconsidering the £1.5bn project, and has also decided to locate its new head of international business, Heidi Miller, in New York rather than in London, in part because of the new top-rate tax of 50 per cent.

"New York is hardly a tax haven," said James Quarmby, a tax partner at law firm Thomas Eggar in London. "It has very high state taxes, particularly by US standards, in addition to the normal federal taxes. Whilst it may be comforting for poorer people to see the 'rich' having their pips squeaked, the unfortunate fact is that if a significant number of our high-earners and their employers leave these shores, this will have a devastating effect on public finances."

Comments