London tax data questioned as banks push budget case

A major banking lobby group faces criticism for potentially misleading the UK government by selectively using data to argue against a tax increase. UK Finance, which represents institutions such as Lloyds, JP Morgan, and Revolut, has promoted a report claiming that London is the most tax intensive city in the world. The group warns that raising taxes in next week's budget could cause banks to move business and jobs to rival financial centers.

The annual report, compiled by the accountancy firm PwC, calculates the total tax burden on a large bank. It includes corporation tax, social security, VAT, and specific bank levies. According to the data, London imposes a total tax rate of 46.2 percent. This is higher than rates in Amsterdam at 42.2 percent, Frankfurt at 39.1 percent, Dublin at 29 percent, and New York at 27.9 percent. UK Finance sent a letter to Chancellor John Healey emphasizing these figures to make its case.

However, questions have emerged regarding the exclusion of Paris from these comparisons. Paris is a significant rival to London and hosts many large investment banks, including JP Morgan, Goldman Sachs, and Barclays. Independent calculations reviewed by a leading accountancy firm suggest that a bank in Paris would face a total tax rate between 51.6 percent and 57.3 percent. This is up to 11.1 percentage points higher than the rate in London.

UK Finance stated that it considered including Paris but could not generate a robust like for like figure using its specific model bank. The group argued that keeping the same five cities allows for consistent comparison over time. It also noted that previous editions of the report showed jurisdictions like Frankfurt having higher total tax rates than the UK at that time.

Campaigners argue that the omission of Paris is notable, especially as banks seek to protect their profits ahead of the budget. Paul Nowak, general secretary of the Trades Union Congress, described 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, which he believes are likely lower than those of many competitors.

Simon Youel, head of policy and advocacy at the campaign group Positive Money, raised concerns about the report's methodology. He questioned whether Paris was cynically 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 see through the lobbying and follow other countries in raising bank taxes to recoup windfall profits generated by higher interest rates.

The TUC has proposed that reversing previous Conservative cuts and increasing the bank surcharge from 3 percent to 8 percent could raise 2.25 billion pounds per year. Nowak added that the Chancellor has a responsibility to ask those benefiting from windfall profits to pay a fairer share, particularly as 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 the financial impact of a tax rise would be bearable and 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 also been contacted for comment regarding the methodology used in the report.