City of London Tax Rankings Under Fire as Paris Disappears From Data

UK Finance has faced sharp scrutiny after using a new report to argue that the UK should avoid raising taxes on banks in next week's budget. The lobby group, which represents major institutions like Lloyds and Revolut, claims London is the most tax-intensive financial hub in the world. They warn that increasing levies could force banks to shift jobs and operations to other global centers.

The data comes from an annual report by PwC. It calculates the total tax burden on a large bank by adding up corporation tax, social security, VAT, and specific bank levies. The report states that London imposes a total rate of 46.2 percent. This figure is higher than those in Amsterdam, Frankfurt, Dublin, and New York. UK Finance sent this analysis to Chancellor John Healey to support its position.

A significant gap in the data has raised eyebrows among independent analysts. The report excludes Paris, a major rival city that hosts giants like Goldman Sachs and Barclays. Independent calculations suggest a bank in Paris would face a tax rate between 51.6 and 57.3 percent. This is up to 11.1 percentage points higher than the rate in London.

UK Finance explained that it left Paris out because it could not generate a comparable figure using its specific model. The group argues that sticking to the same five cities allows for consistent tracking over time. It noted that previous editions of the report showed places like Frankfurt having higher rates than the UK at that time.

Paul Nowak, general secretary of the Trades Union Congress, called the lobbying effort a misleading attempt to avoid fair taxes. He stated that the data does not reflect the actual taxes paid by Britain's big banks. Nowak believes these banks likely pay less than many of their competitors. He added that the Chancellor has a duty to ask those benefiting from windfall profits to pay a fairer share.

Simon Youel of Positive Money questioned whether Paris was cynically omitted to make the City look like a top tax contributor. Youel expressed hope that the Chancellor will see through the lobbying. He suggested following other countries in raising bank taxes to recoup profits generated by higher interest rates.

The TUC has proposed a plan to reverse previous Conservative cuts. Increasing the bank surcharge from 3 percent to 8 percent could raise 2.25 billion pounds per year. Nowak highlighted that millions of people struggle to make ends meet while banks pay out billions to shareholders and executives.

Reactions from banking leaders have been mixed. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that a tax rise would be bearable. He gave the Chancellor his full support. 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 put investment and jobs at risk.

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