Paris excluded: UK bank lobby cites London tax rates ahead of budget

UK Finance, the trade body representing major lenders, has omitted Paris from its annual comparison of global tax burdens on banks. The group submitted a letter to Chancellor John Healey ahead of next week's budget, arguing that London's current tax environment is the most expensive in the world. This exclusion removes a key rival city from the data set, despite Paris hosting major investment banks.

The lobby group relies on a report produced by PwC, which calculates the total tax load for a hypothetical large bank. The metric combines corporation tax, social security contributions, value added tax, and specific bank levies. According to this model, a bank operating in London faces a total tax rate of 46.2 percent. The report positions this figure above those in Amsterdam, Frankfurt, Dublin, and New York.

Independent calculations reviewed by a major accountancy firm suggest that the tax burden in Paris is substantially higher. Estimates place the total tax rate for a bank in the French capital between 51.6 percent and 57.3 percent. This range is up to 11.1 percentage points higher than the rate reported for London. The omission of these figures means the lobby's claim that London is the most tax intensive city is not supported by the full data set.

UK Finance stated that it considered including Paris in the analysis. However, the group said it could not generate a comparable figure using its specific model bank. The trade body argued that retaining the same five cities allows for consistent comparisons over time. It noted that previous editions of the report showed other jurisdictions, such as Frankfurt, having higher total tax rates than the UK at that time.

Paul Nowak, general secretary of the Trades Union Congress, criticized the lobbying effort as misleading. He stated that the data does not reflect the actual taxes paid by Britain's big banks. Nowak argued that these banks likely pay lower taxes than many of their competitors. He described the omission of Paris as a strategy to protect profits ahead of the budget announcement.

Simon Youel, head of policy at Positive Money, questioned the methodology behind the report. He asked whether Paris was left out to allow UK Finance to claim the City contributes more tax than any other global financial sector. Youel expressed hope that the Chancellor would follow other countries in raising bank taxes to recoup windfall profits generated by higher interest rates.

The TUC has proposed reversing previous tax cuts and increasing the bank surcharge from 3 percent to 8 percent. This change 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. He noted 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 the financial impact of a tax rise would be bearable. He 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 stated 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 been contacted for comment regarding the methodology used in the report.