19th Mar 2014 17:52
LONDON (Alliance News) - The UK government said Wednesday it will consult on the merits of tying its levy on banks to the health of their balance sheets rather than the current flat rate charged on all banks.
The tax on banks that has been criticised by the sector for eating into profits at a time when capital requirements are becoming increasingly stringent, but the government says the levy is a way for the banks to compensate taxpayers for bailing out the financial system in 2008 and extending it life support in the form of cheap credit.
In its budget document Wednesday, the Treasury said it will put out a consultation document March 27 on a proposal that banks are put into different bands according to their chargeable equity and liabilities and then charged an amount set for that band.
Overall revenue raised from the banks will remain unchanged, The Treasury said.
According to the Office for Budget Responsibility, the levy is expected to raise GBP2.3 billion in 2013-14. The OBR forecasts that figure will rise to GBP2.9 billion by 2018-19. The 2014 rate for the bank levy is set at 0.156%.
Any subsequent changes to the bank levy?s design would come into force from January 1 2015.
David Roper, partner and financial services leader at PwC in the Midlands, said Osborne's decision to resist raising the bank levy was "encouraging".
"We welcome consultation on a new charging mechanism for the bank levy. However, there needs to be a more fundamental review of the bank levy as its two aims ? to raise revenue and to change behaviour - arguably run counter to each other," Roper said in a statement.
"The bank levy acts as a double hit on UK competitiveness - it makes the UK a less competitive location for banking business and it makes UK headquartered banks less competitive when doing business overseas," Roper added.
FTSE 100 banks HSBC Holdings and Standard Chartered PLC, which both conduct the bulk of their business outside of the UK, have paid out big sums for their foreign operations as a result of the UK levy. In 2013 HSBC paid USD904 million towards the bank levy, with USD484 million of that related to non-UK banking activity, according to the bank's 2013 financial statement. Standard Chartered has said the levy puts "upward pressure" on costs in 2013, as the amount the bank paid rose by USD92 million to USD266 million.
By Samuel Agini; [email protected]; @samuelagini
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