SPERI’s latest British Political Economy Brief considers the impact of the changes to taxes on banks made by the Chancellor of the Exchequer in his Budget in July 2015, specifically the introduction of an 8 per cent corporation tax surcharge on bank profits and a reduction in the Bank Levy.
The Brief, by SPERI Doctoral Researcher Adam Barber and Tom Hunt, assesses the impact of the new surcharge on three categories of banking institutions: the big global banks headquartered in the UK; building societies; and challenger banks. It looks at the rationale used to make the bank tax changes and in doing so raises questions about the purpose and proportionality of taxes levied upon banks in the UK.
SPERI’s research, based on analysis of 2014 bank results, estimates that challenger banks and building societies will pay a higher surcharge rate as a proportion of their overall balance sheet than the biggest global banks based in the UK. The biggest banks will make the biggest surcharge contributions but the new findings suggest that small and new challenger banks are right to be concerned about the fairness and proportionality of the surcharge, and whether it will undermine diversification and greater competition in the UK banking sector.
The Brief contributes to ongoing debates about whether, eight years on from the global financial crisis, the restructured UK bank tax regime has become more favourable to the interests of the biggest banks.