Bank Lobby Report Leaves Paris Out of London Tax Comparison

A dispute over financial data has emerged ahead of the UK budget.

UK Finance, the trade body representing major lenders including Lloyds and JP Morgan, promoted a report stating that London carries the highest tax burden of any global financial center. The group warned that raising taxes in next week’s budget could prompt banks to shift operations and employment to rival cities.

The annual study was prepared by the accountancy firm PwC. It calculates the total tax load on a standardized large bank, incorporating corporation tax, social security contributions, VAT, and specific banking levies. According to the figures provided, London’s total tax rate stands at 46.2 percent. This exceeds the rates in Amsterdam at 42.2 percent, Frankfurt at 39.1 percent, Dublin at 29 percent, and New York at 27.9 percent. UK Finance highlighted these numbers in a letter to Chancellor John Healey to support its position.

Critics note that the comparison excludes Paris, a major competitor that hosts significant investment banking operations for firms like Goldman Sachs and Barclays. Independent calculations, reviewed by a leading accountancy firm, estimate that a bank in Paris would face a total tax rate ranging from 51.6 percent to 57.3 percent. This range is up to 11.1 percentage points higher than the rate cited for London.

UK Finance said it evaluated including Paris but could not produce a comparable figure using its specific model bank. The group argued that limiting the analysis to the same five cities allows for consistent tracking over time. It also pointed out that earlier editions of the report showed jurisdictions like Frankfurt having higher total tax rates than the UK at that period.

Paul Nowak, general secretary of the Trades Union Congress, described the lobbying as a misleading effort to resist fair taxation. He argued that the data does not reflect the actual taxes paid by Britain's large banks, which he believes are likely lower than those of many competitors. Nowak stated that the TUC proposes increasing the bank surcharge from 3 percent to 8 percent, a move that could raise 2.25 billion pounds annually.

Simon Youel, head of policy at Positive Money, questioned the methodology. 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 profits generated by higher interest rates.

Banking leaders have sent mixed signals. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the financial impact of a tax rise would be bearable. Jamie Dimon, head of JP Morgan, warned in May that the bank could cancel 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 risk investment and jobs.

A Treasury spokesperson said that decisions on tax are for the Chancellor to set out at fiscal events. The department noted it does not routinely comment on rumors or proposals. PwC has been contacted for comment on the report's methodology.