UK Finance Faces Scrutiny Over Omission of Paris in Tax Report Ahead of Budget

The upcoming budget has become a focal point for debate over the tax treatment of the financial sector. As the government prepares to announce its fiscal plans, a significant question mark has been placed over the data presented by the leading banking lobby group, UK Finance.

UK Finance, which represents major institutions including Lloyds, JP Morgan, and Revolut, has been advocating against tax increases by highlighting a new report. The document, prepared by the accountancy firm PwC, asserts that London is the most tax intensive city in the world for large banks. The group argues that raising taxes could prompt these firms to relocate their operations and jobs to rival financial hubs.

The report calculates a total tax burden of 46.2 percent for a large bank operating in London. This figure incorporates corporation tax, social security contributions, VAT, and specific banking levies. To underscore its point, the report compares this rate to those in Amsterdam, Frankfurt, Dublin, and New York, which range from 27.9 percent to 42.2 percent. UK Finance sent a letter to Chancellor John Healey emphasizing these figures to support its position.

However, the analysis has drawn attention for its exclusion of Paris, a major competitor to London that hosts significant investment banks such as Goldman Sachs and Barclays. Independent calculations suggest that a bank in Paris would face a total tax rate between 51.6 percent and 57.3 percent. This would make the French capital's burden up to 11.1 percentage points higher than that of London.

UK Finance explained that it considered including Paris but could not generate a comparable figure using its specific model bank. The group maintained that sticking to the same five cities allows for consistent tracking over time. It also noted that in previous editions of the report, cities like Frankfurt had higher total tax rates than the UK.

Critics contend that the omission is significant, particularly as banks seek to safeguard their profits. Paul Nowak, general secretary of the Trades Union Congress, described the lobbying effort as a misleading attempt to argue against fair taxation. He argued that the data does not reflect the actual taxes paid by Britain's large banks, which he believes are likely lower than those of many competitors.

Simon Youel, head of policy at Positive Money, questioned the methodology, suggesting that Paris may have been left out to allow UK Finance to claim the City contributes more tax than any other global financial sector. Youel expressed hope that the Chancellor would follow other nations in raising bank taxes to recoup windfall profits generated by higher interest rates.

The TUC has proposed that increasing the bank surcharge from 3 percent to 8 percent could raise 2.25 billion pounds annually. Nowak added that the Chancellor has a responsibility to ensure those benefiting from windfall profits pay a fairer share, especially while millions struggle financially and banks distribute billions to shareholders and executives.

Reactions from banking leaders have been divided. CS Venkatakrishnan, chief executive of Barclays, stated that the financial impact of a tax rise would be bearable and offered full support to the Chancellor. In contrast, Jamie Dimon 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 jeopardize investment and jobs.

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