Bankers cite 46.2% London tax rate while skipping Paris data

UK Finance has warned that a tax increase in next week's budget could force banks to move operations out of London. The trade group relies on a report claiming the UK capital has the highest tax burden for banks globally. This claim underpins the letter sent to Chancellor John Healey ahead of fiscal announcements.

The data comes from an annual report produced by the accountancy firm PwC. It calculates a composite tax rate for a large bank by combining corporation tax, social security contributions, VAT, and specific bank levies. According to this model, London imposes a total rate of 46.2 percent.

The report compares London to four other financial hubs. Amsterdam shows a rate of 42.2 percent. Frankfurt stands at 39.1 percent. Dublin records 29 percent, and New York registers 27.9 percent. UK Finance used these figures to argue that further levies would make the city less competitive.

Paris, a major rival to London, is absent from the comparison. The city hosts major investment banks including JP Morgan, Goldman Sachs, and Barclays. Independent calculations reviewed by another accountancy firm place the Paris tax rate between 51.6 percent and 57.3 percent. This range is up to 11.1 percentage points higher than the London figure.

UK Finance stated that it considered adding Paris to the list. However, the group said it could not generate a comparable figure using its specific model bank. It argued that limiting the list to five cities maintains consistency over time. The group noted that in previous years, Frankfurt had higher rates than the UK.

Critics suggest the omission helps the banks' case. Paul Nowak, general secretary of the Trades Union Congress, called the effort a misleading attempt to avoid fair taxes. He argued that the data does not reflect the actual taxes paid by UK banks, which he believes are likely lower than those in competitor jurisdictions.

Simon Youel, head of policy at Positive Money, questioned the methodology. He asked if Paris was left out to support the claim that the City contributes more tax than other global sectors. Youel expressed hope that the Chancellor would raise bank taxes to recoup profits from higher interest rates.

The TUC proposed raising the bank surcharge from 3 percent to 8 percent. Nowak said this would raise 2.25 billion pounds per year. He added that the Chancellor should ask those benefiting from windfall profits to pay a fairer share while millions of people struggle financially.

Banking leaders have reacted differently to the potential hike. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the impact would be bearable. He gave his full support to the Chancellor. Jamie Dimon, head of JP Morgan, warned in May that the bank could scrap its 3 billion pound London headquarters if the UK became hostile.

Dimon met with Andy Burnham and Healey last month to discuss the risks of further levies. A Treasury spokesperson said tax decisions are for the Chancellor to outline at fiscal events. The department noted it does not routinely comment on speculation. PwC has been contacted for comment on the report's methodology.