POLITICS

Bank Levy Hurting City Of London, George Osborne Warned

25/02/2014 10:41 GMT | Updated 25/02/2014 10:59 GMT
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A pedestrian passes bank headquarters and commercial real estate offices in the Canary Wharf business and financial district in London, U.K., on Tuesday, Nov. 19, 2013. Bank employees used their mobile phones and instant-messages to transmit details of impending client orders to individuals working from rented trading desks in offices on the outskirts of the U.K. capital, who then made bets on their behalf, according to three traders who said they had witnessed the practice over a period of years. Photographer: Chris Ratcliffe/Bloomberg via Getty Images

George Osborne has come under pressure to end the bank levy, as Britain's banks warned that the tax is hurting the City of London's competitiveness.

The British Bankers' Association argued that the chancellor's decision to regularly hike how much is paid through the bank levy is damaging as banks are given "minimal advance notice" about the changes.

The tax is levied on banks' balance sheets, taking 0.156% of their liabilities. Osborne announced in last year's autumn statement that the levy would raise "£2.7bn in 2014-15 and £2.9bn each year from 2015-16".

However in its submission to the Treasury ahead of Osborne's Budget next month, the BBA warned: "The bank levy rate has been increased eight times since (it) was first announced at Budget 2010, and many of those increases have been implemented with minimal advance notice.

“The frequency of the rate change has not resulted in a stable tax environment for the banking industry and is inconsistent with the government’s desire for the UK to have a competitive, stable and predictable tax regime for business.”

The BBA argued that the bank levy "adversely affects the competitive landscape and the UK's position as a financial centre" and pointed out that few other countries have a bank levy at all.

The group said that the frequency of levy changes had "not resulted in a stable tax environment for the banking industry and is inconsistent with the Government's desire for the UK to have a competitive, stable and predictable tax regime for business which encourages inward investment and supports the UK's place as the world's leading international financial centre".