Budget 2012: Bank Levy Up for the Fourth Time
Commenting on the announcement that the bank levy will increase from 0.088 % of banks’ balance sheets to 0.105%, Tom Aston, financial services tax partner at KPMG commented:
“For the fourth time, banks are being hit with another increase in the bank levy. It is surprising that the yield estimates keep being revised downwards so sharply, and that the tax has risen so many times. Predicting bank levy liabilities has become very difficult for banks who are trying to plan ahead.
“The recent UK bank results highlighted the negative impact the levy has had on banks’ financial results and this increase will no doubt continue to make a dent in profitability. At a time where the more international focused banks are already outperforming UK focused ones, today’s increase may prompt banks to again reassess the attractiveness of operating in the UK.
“Once again there are concerns that the government’s desire to maintain an annual bank levy take of at least £2.5 billion may create the wrong incentives for bank lending. If banks shrink their balance sheets then they will pay less bank levy, but typically at the same time they will be lending less to the economy. The banks who maintain their lending are being asked to pick up the bill for those who lend less. UK banks who remain here must also be worried that they will be asked to pick up the bill for any large banks who decide to leave the country.”