Banking lobby accused of hiding Paris tax data ahead of budget

A fierce debate has erupted over the accuracy of tax data presented by major banks as they lobby for a favorable budget. UK Finance, an industry group representing giants like Lloyds and Revolut, recently warned that raising taxes could force financial firms to relocate their operations and jobs away from the city. The group relied on a report claiming that the capital imposes the highest total tax burden on large banks among the world's major financial centers. This assertion is now under scrutiny as the government prepares to unveil its fiscal plans next week.

The controversy centers on a study prepared by the accountancy firm PwC. The analysis calculates the total tax load for a hypothetical large bank, factoring in corporation tax, social security, value added tax, and specific levies on the banking sector. According to this model, the capital’s total rate stands at 46.2 percent. The report compares this figure against Amsterdam, Frankfurt, Dublin, and New York. It shows that the capital’s rate is higher than all four rivals. UK Finance sent these figures directly to Chancellor John Healey to support its argument against further increases.

Doubts have surfaced regarding why Paris was excluded from this comparison. The French capital hosts numerous major investment banks and is a direct competitor to the city. Independent calculations suggest that a similar institution in Paris would face a total tax rate ranging from 51.6 to 57.3 percent. This potential gap means the capital could be up to 11.1 percentage points lower than its rival. UK Finance stated that it attempted to include Paris but could not produce a reliable comparable figure using its specific model. The group argued that sticking to the same five cities allows for consistent tracking over time.

Campaigners see the omission as a strategic move to shield bank profits. Paul Nowak, general secretary of the Trades Union Congress, called the lobbying effort misleading. He argued that the data does not reflect the actual taxes paid by large domestic banks, which he believes are likely lower than those in competing jurisdictions. Simon Youel, head of policy at Positive Money, questioned the methodology. He suggested that Paris may have been left out to support the claim that the financial sector contributes more in taxes than anywhere else globally.

The TUC has proposed a specific fix to address these concerns. They suggest reversing previous cuts and raising the bank surcharge from 3 to 8 percent. This change could generate 2.25 billion pounds annually. Nowak emphasized that the Chancellor has a duty to ask those benefiting from windfall gains to pay a fair share. He noted the contrast between millions of people struggling with daily costs and banks distributing billions to shareholders and executives.

Leadership within the banking sector has sent mixed signals about the potential impact of a tax rise. CS Venkatakrishnan, chief executive of Barclays, told reporters on Thursday that the industry can absorb the cost. He expressed full support for the Chancellor's decisions. In contrast, Jamie Dimon, head of JP Morgan, warned in May that the bank might cancel plans for a new 3 billion pound headquarters if Britain becomes too hostile. Dimon met with political leaders last month to voice concerns that new levies could endanger investment and employment.

A Treasury spokesperson said that tax decisions are for the Chancellor to define during upcoming fiscal events. The department stated that it does not routinely comment on rumors or proposals. PwC has been contacted to discuss the methodology used in the disputed report.