Osborne’s plan to introduce an eight per cent surcharge on the Corporation Tax liabilities of banks earning more than 25m on an annual basis, will be softened by reducing the rate of the Bank Levy introduced in 2010.
However, experts have argued that the industry is likely to be hit far harder than expected.
According to Richard Milnes, a partner at EY, the tax-take would be double the Treasurys estimate. In an article by the Financial Times, he explained that the 6bn forecast would reflect the tax-take from only ten banks.
Given this, the tax-take from the entire sector could be far more than double the HMT forecast,” Milnes said.
Read more about tax:
- 5 reasons to keep your business and personal finances separate
- The designer that started a business in the industry he loathed
- Scottish retailers slam taxes
EY’s report comes just days after a dozen executives from challenger banks sent a letter to the chancellor. The bosses claimed the tax would put them at a disadvantage relative to other lenders.”
The letter added: “In addition to the potential reduction in lending, I am concerned that these changes could negatively impact our job creation in your constituency.”
The challengers expect the surcharge to result in a 6bn reduction in lending to SMEs over the course of this parliament.
Osborne told the industry that there would be no change to the surcharge “in this fiscal year”, which has led to bank executives hoping the government will reduce or abolish it next year.
Julian Knight, conservative MP for Solihull, suggested that banks of all shapes and sizes have to pay a fair share. By introducing the bank rate in the Budget the chancellor has given all UK banks absolute clarity as to what they will be paying from now on.