Con-doc looks at bank levy's design

14 July 2010

Issue: 4264 / Categories: News , bank levy , Budget 2010 , CIOT , Mark Hoban , Vincent Oratore

Tax's structure will be hard to get right, warns CIOT head

The Government has launched a consultation on the bank levy announced in last month’s Budget.

The new document sets out issues around technical aspects of the design and implementation of the tax, in the hope it will be designed in a way that best meets its objectives, including ensuring the compliance costs faced by firms are minimised.

Draft legislation has been scheduled for the autumn to allow for further comments from stakeholders, and the final outline is expected to be included in the 2011 Finance Bill, will be published towards the end of this year.

The structure of the proposed levy is intended to encourage financial institutions to move away from riskier funding models, reducing systemic risk, said the Treasury, which expects the tax to generate around £2.5 billion per annum. It will apply to the balance sheets of UK banks and building societies and to the UK operations of banks from abroad.

The financial secretary to the Treasury, Mark Hoban, said, ‘Alongside the wider financial regulatory reform aimed at increasing the resilience of the financial sector, the levy is intended to ensure that the banking industry makes a fair contribution that reflects the risks it poses to the financial system and the wider economy, and to encourage banks to move away from riskier funding.’

The president of the Chartered Institute of Taxation, Vincent Oratore, welcomed the con-doc, but warned that ‘the structure of the bank levy will be difficult to get right. This is because of its interface with bank regulation, which seeks to accomplish similar goals.

‘As recognised in the document, calibration of the tax will need to be carefully thought through as the base changes. Double taxation, which is inherent in the levy, also needs to be eliminated,’ added Mr Oratore.