Bankers' Tax Case Excludes Paris From Global Comparison

UK Finance submitted a letter to Chancellor John Healey this week urging him to hold off on raising bank taxes in the upcoming budget. The lobbying group, which represents major institutions including Lloyds, JP Morgan, and Revolut, relies on a PwC report that ranks London as the world's most tax-intensive financial center. The correspondence warns that increasing levies could prompt banks to shift operations and employment to competing global cities.

The underlying data calculates a composite tax burden for a large bank, combining corporation tax, social security, VAT, and specific bank levies. The report assigns London a total rate of 46.2 percent. This figure exceeds the rates cited for Amsterdam at 42.2 percent, Frankfurt at 39.1 percent, Dublin at 29 percent, and New York at 27.9 percent. UK Finance used these specific numbers to argue that the UK already imposes a heavy fiscal load on the sector.

Critics point out that the comparison leaves out Paris, a major competitor for investment banking business. The city hosts large branches of JP Morgan, Goldman Sachs, and Barclays. Independent calculations reviewed by an accountancy firm estimate that a bank operating in Paris would face a total tax rate between 51.6 percent and 57.3 percent. This range is up to 11.1 percentage points higher than the figure for London.

UK Finance explained that it evaluated the possibility of including Paris but found it difficult to produce a comparable figure using its standard model bank. The group stated that retaining the same five cities allows for consistent year-on-year tracking. It noted that in previous editions of the report, jurisdictions such as Frankfurt had higher total tax rates than the United Kingdom.

Paul Nowak, general secretary of the Trades Union Congress, called the omission a misleading tactic to resist fair taxation. He argued that the data does not reflect the actual taxes paid by Britain's major banks, which he believes are lower than those paid by many international competitors. Nowak suggested that reversing previous Conservative cuts and raising the bank surcharge from 3 percent to 8 percent would generate 2.25 billion pounds annually.

Simon Youel, head of policy and advocacy at Positive Money, questioned the methodology behind the report. He asked whether Paris was deliberately excluded to support the claim that the City of London contributes more tax than any other global financial sector. Youel expressed the view that the Chancellor should follow other nations in raising bank taxes to capture profits generated by higher interest rates.

Leaders within the banking industry have offered mixed reactions to the proposed tax changes. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the financial impact of a tax rise would be manageable. He gave the Chancellor his full support for the move. In contrast, Jamie Dimon, head of JP Morgan, warned in May that the bank could cancel plans for a new 3 billion pound London headquarters if Britain became hostile to the sector.

Dimon met with Andy Burnham and Chancellor Healey last month to warn that additional levies could endanger investment and jobs. A Treasury spokesperson responded that tax decisions rest with the Chancellor for disclosure at fiscal events. The department added that it does not routinely comment on rumors or proposals. PwC has been contacted for comment on the methodology used in the report.