A banking lobby group has been accused of cherrypicking data and trying to mislead the British government by claiming a tax rise for banks at next week’s budget would leave London less competitive than rival financial hubs.
UK Finance, which represents banks including Lloyds, JP Morgan and Revolut, commissions an annual report tallying up all the taxes shouldered by a large bank, including corporation tax, social security, VAT and bank-specific levies.
The report, put together by PwC, lists London as the most tax-intensive city, charging a “total tax rate” of 46.2%, compared with 42.2% in Amsterdam, 39.1% in Frankfurt, 29% in Dublin and 27.9% in New York.
The figures have been heavily pushed by UK Finance, including in a recent letter to John Healey, the chancellor, in which it warned that banks could shift business and jobs to rival hubs if threatened with higher bills.
However, questions are now being raised about the lobby group’s data. They include why Paris, one of London’s biggest rival financial hubs and host to many large investment banks including JP Morgan, Goldman Sachs and Barclays, has consistently been excluded from UK Finance comparisons.
Calculations by the Guardian, which were reviewed by a leading accountancy firm, show that the same bank in Paris would face a total tax rate of between 51.6% and 57.3%. That is up to 11.1 percentage points higher than London.
UK Finance said it had considered including Paris but was not able to produce a “robust like-for-like figure using the report’s model bank”.
However, campaigners said it was a notable exclusion, particularly at a time when banks had been looking for ways to protect surging profits and avoid higher taxes, which are due to hit the sector at next week’s budget.
Paul Nowak, the general secretary of the Trades Union Congress (TUC), said: “It’s little surprise that some in the finance lobby are cherrypicking jurisdictions to aid their argument. This is a misleading attempt to make the case against fair taxes … it tells us nothing about the actual taxes paid by Britain’s big banks, which are likely far lower than many competitors.”
Positive Money, a campaign group, said there were wider questions about the report’s methodology, “not least the conspicuous absence of Paris, one of London’s biggest rivals as a financial centre”.
“This raises the question of whether Paris was cynically omitted to allow the report’s sponsor, UK Finance, to claim that the City contributes more tax than any other global financial sector,” said Simon Youel, the group’s head of policy and advocacy.
“Hopefully John Healey is smart enough to see through the wool being pulled over his eyes by City lobbyists, and will follow other countries in raising taxes on banks to claw back enormous windfalls from higher interest rates being paid for by the public.”
The two campaign groups have pushed strongly for a rise in bank taxes. The TUC says reversing Tory cuts and increasing the surcharge – a bank-specific tax on the industry – from 3% to 8% could raise £2.25bn per year.
UK Finance said: “Paris has not been excluded because of its relative tax position. We previously explored including it but could not produce a robust like-for-like figure using the report’s model bank. The five cities included have remained consistent to support comparison over time. Previous editions of the report have also shown jurisdictions such as Frankfurt with higher total tax rates than the UK at the time.”
PwC has been contacted for comment.
Nowak said: “At a time when working people are in dire need of support, the chancellor has a responsibility to ask those who have done well from windfall profits to pay a fairer share of tax. Britain’s banks are booming and are paying out billions to shareholders and senior execs while millions struggle to make ends meet. It is right to ask them to pay more tax.”
Some banking bosses already appear to have raised the white flag, with CS Venkatakrishnan, the chief executive of Barclays, telling journalists on Thursday that the financial hit from a tax rise for banks would be “bearable” and giving the chancellor his “full support”.
However, Jamie Dimon, the JP Morgan boss, warned in May that he could scrap plans for a new £3bn London headquarters – which was announced days after the former chancellor, Rachel Reeves, spared the sector from a tax rise last year – if Britain became “hostile” to banks. Dimon met Andy Burnham and Healey last month, and warned that further levies on the sector could put investment and jobs at risk.
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events, and we do not routinely comment on rumour, speculation or proposals.”
