U.K. to Raise $2.3 Billion More in Bank Surcharge Amid BrexitBy
Bank corporation tax surcharge to net more than U.K. planned
Higher forecast comes as some lenders plan to move operations
The U.K. forecast an additional 1.9 billion pounds ($2.3 billion) of tax on bank profits over the next five years, even as some global lenders prepare to relocate operations following Brexit.
The nation increased its estimate for receipts from an 8 percent corporation tax surcharge on bank profits to 9 billion pounds in the period through March 2022, according to Chancellor of the Exchequer Philip Hammond’s Budget documents on Wednesday. The U.K.’s Office for Budget Responsibility said the levy had beaten expectations since its introduction in January last year.
Global lenders from JPMorgan Chase & Co. to HSBC Holdings Plc have warned thousands of jobs may leave the City of London, depending on the deal Prime Minister Theresa May seals with her 27 European Union partners. While it’s too early to tell how many jobs will relocate, business leaders have called for her to protect an industry that contributes more in British taxes than any other sector.
The OBR, an agency tasked with monitoring government spending and receipts, had originally given the bank tax surcharge a “very high” uncertainty rating mainly because of the difficulty in predicting the profitability of banks and also their likely “behavioral response.”
However, the U.K. is now on course to collect 1.5 billion pounds in the fiscal year through March 2017, about 500 million pounds higher than expected, after the surcharge “outperformed expectations,” according to the OBR. Income from the tax is also anticipated to be higher than previously thought in each period through March 2022, well after the point when Britain intends to leave the European Union.
The banking industry’s corporation tax surcharge contributions are in addition to taxes applicable to all companies, as well as the government’s levy on bank balance sheets, which is gradually being cut. Lenders are expected to pay about 18 billion pounds for the bank levy over the five years through March 2022.