Bankers warn London tax burden is global highest

London banks pay a higher total tax rate than their peers in New York, Amsterdam, and Frankfurt, according to a new industry report. The data was compiled by the accountancy firm PwC at the request of UK Finance, a lobby group representing major institutions. The group is using these figures to argue against new taxes in the upcoming budget.

UK Finance represents lenders including Lloyds, JP Morgan, and Revolut. The organization sent a letter to Chancellor John Healey before next week's budget announcement. The letter warns that raising taxes could force banks to move jobs and business to rival financial centers. The report calculates the total tax burden on a large bank by combining corporation tax, social security, VAT, and specific bank levies.

The data shows that London imposes a total tax rate of 46.2 percent. This figure is higher than the rates in Amsterdam at 42.2 percent and Frankfurt at 39.1 percent. Dublin has a rate of 29 percent, while New York sits at 27.9 percent. UK Finance stated that these comparisons help track consistency over time. The group noted that previous editions of the report showed other jurisdictions with higher total tax rates than the UK at those times.

Questions have arisen regarding the exclusion of Paris from the comparison. Paris hosts major investment banks, including JP Morgan, Goldman Sachs, and Barclays. Independent calculations reviewed by an accountancy firm suggest that a bank in Paris would face a total tax rate between 51.6 percent and 57.3 percent. This is up to 11.1 percentage points higher than the rate in London. UK Finance said it could not generate a comparable figure for Paris using its specific model bank.

Paul Nowak, general secretary of the Trades Union Congress, described the lobbying effort as a misleading attempt to argue against fair taxes. He stated that the data does not reflect the actual taxes paid by Britain's big banks. Nowak believes the real rates are likely lower than those of many competitors. The TUC has proposed increasing the bank surcharge from 3 percent to 8 percent. This change would raise 2.25 billion pounds per year by reversing previous Conservative cuts.

Simon Youel, head of policy at Positive Money, questioned the report's methodology. He asked whether Paris was left out to support the claim that the City contributes more tax than any other global financial sector. Youel expressed hope that the Chancellor would follow other countries in raising bank taxes. This would recoup windfall profits generated by higher interest rates. The TUC argues that those benefiting from these profits should pay a fairer share while millions struggle to make ends meet.

Reactions from banking leaders have been mixed. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the financial impact of a tax rise would be bearable. He gave the Chancellor his full support. In contrast, Jamie Dimon, the head of JP Morgan, warned in May that the bank could scrap plans for a new 3 billion pound London headquarters. Dimon met with Andy Burnham and Healey last month to warn that further levies could put investment and jobs at risk.

A Treasury spokesperson said that tax decisions are for the Chancellor to set out at fiscal events. The department noted that it does not routinely comment on rumors or proposals. PwC has been contacted for comment regarding the methodology used in the report.