Bankers' London tax claim skips higher Paris rate

UK Finance submitted a letter to Chancellor John Healey this week arguing that London imposes the highest tax burden on large banks globally, but the data supporting that claim excludes Paris. The lobbying group represents major institutions including Lloyds, JP Morgan, and Revolut. It warned that raising taxes in next month's budget could drive financial activity and jobs to competing cities.

The argument relies on an annual report produced by the accountancy firm PwC. This document calculates the total tax cost for a large bank by combining corporation tax, social security contributions, value added tax, and specific bank levies. According to the figures provided, a bank in London faces a total rate of 46.2 percent. This rate exceeds those in Amsterdam at 42.2 percent, Frankfurt at 39.1 percent, Dublin at 29 percent, and New York at 27.9 percent.

Independent calculations suggest that a bank in Paris would face a total tax rate between 51.6 percent and 57.3 percent. That figure is up to 11.1 percentage points higher than the rate in London. Paris hosts several large investment banks, including JP Morgan, Goldman Sachs, and Barclays. Its exclusion from the comparison has drawn scrutiny from critics who view the omission as selective.

UK Finance said it considered including Paris in the analysis but could not generate a comparable figure using its specific model bank. The group stated that maintaining the same five cities allows for consistent tracking over time. It also pointed out that previous editions of the report showed jurisdictions like Frankfurt having higher total tax rates than the United Kingdom at that time.

Paul Nowak, general secretary of the Trades Union Congress, criticized 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 argued that these payments are likely lower than those of many competitors. The TUC has proposed increasing the bank surcharge from 3 percent to 8 percent, a move it says would raise 2.25 billion pounds per year.

Simon Youel, head of policy and advocacy at Positive Money, questioned the methodology behind the report. He asked whether Paris was left out to allow UK Finance to 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 to recoup windfall profits generated by higher interest rates.

Banking leaders have offered mixed reactions to the potential tax increase. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the financial impact 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 if Britain became hostile to banks.

Dimon met with Andy Burnham and Healey last month to warn that further levies could put investment and jobs at risk. A Treasury spokesperson responded by stating that decisions on tax are a matter for the Chancellor to set out at fiscal events. The department noted that it does not routinely comment on rumors, speculation, or proposals. PwC has been contacted for comment regarding the methodology used in the report.