The chancellor has decided against increasing taxes on banks in this month’s budget, according to reports, which sent UK bank shares higher on Thursday.
Shares in the high street bank NatWest were up by 2.5% and the rival Lloyds climbed by 2.3%, putting them among the top risers on London’s FTSE 100.
Despite speculation in the run-up to the 26 November budget, Rachel Reeves has reportedly told colleagues that she does not intend to impose further taxes on the UK banking sector, as she wants it to remain competitive to help support economic growth, according to the Financial Times.
Banks currently pay a corporation tax rate of 28%, which includes a 3% surcharge on top of the standard corporation tax rate of 25%.
Fresh calls for new tax raid on lenders were raised in August in a paper by the Institute for Public Policy Research thinktank, which calculated such a move could raise as much as £8bn.
The report called on Reeves to levy a new tax on the big banks to help to recover the “windfalls” they received as a result of the emergency economic policy known as quantitative easing, which was implemented by the Bank of England after the 2008 financial crisis.
A bank levy has been one of a number of potential tax increases – including on property and landlords’ rental income – discussed in recent weeks, as Reeves seeks to plug a shortfall in the public finances.
Ministers had previously asked Treasury officials to look into the profitability of the UK’s largest banks as a consequence of quantitative easing, the Guardian understands. Speculation about a windfall tax on large banks spooked investors, triggering a sharp sell-off of banking shares and prompting the industry to lobby against higher taxes for the sector.
The banking industry body UK Finance claimed in a report in October that the total tax rate paid by UK banks was higher than that of other financial centres, including New York, Dublin, Frankfurt and Amsterdam, driven by changes to employers’ national insurance contributions from this April.
The total tax contribution of the UK banking sector for the most recent financial year was £43.3bn, representing 4.3% of total UK government tax receipts, according to an estimate by PwC. It found the overall tax contribution had risen by a third since PwC’s study began in 2014, when it was £33.4bn.
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The chief executive of NatWest Group warned the government in recent weeks against increasing taxes on banks, as the high street lender reported a 30% rise in profits.
Paul Thwaite said he understood the “difficult choices” the chancellor had to make in the budget but argued she needed to “balance fiscal discipline” with “policies that create stability, consistency and support growth”, and should consider how higher taxes appear to international investors.
Gary Greenwood, an equity analyst at the broker Shore Capital, said in order to be spared higher taxes, the “quid pro quo” for banks would be demonstrating “a willingness to grow even faster than they are doing in order to support the economy rather than just harvesting the benefits of higher interest rates and so profitability for their shareholders in the form of juicy dividends and share buybacks”.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: theguardian.com
