Tax on banks' capital gets final legislation

Financial institutions will be taxed on their equity and liabilities from 1 January, after the Treasury published final draft legislation of its bank levy.

The permanent annual tax, which has held for discussion since it was announced in the June Budget, will be applied to a bank’s total capital at a rate of 0.05% for the first year, a figure marginally higher than the 0.04% mooted in the first of two the draft documents released earlier this year. The percentage will rise to 0.075 in 2012.

The new levy will applied only to total capital over £20 billion. It is intended to encourage banks and building societies to exercise greater caution in their choices of funding profiles, and it is expected to generate £2.5 billion of additional revenue for the public purse each year.

The financial secretary to the Treasury, Mark Hoban, said the charge ‘will encourage the banks to make greater use of more stable sources of funding, such as long-term debt and equity, working with the grain of our wider programme [to improve regulatory standards].’

Issue: 4285 / Categories: News , bank levy , Mark Hoban