Barclays and HSBC Hit by Budget Banking Levy
UK banks are set to get hit with a levy from the budget that is suppose to raise over £8 billion during the next 4 years, according to Chancellor George Osborne. This levy is part of a joint move that also involves Germany and France.
Osborne said that the recession started with banks, so it’s only fair that they contributed to the recovery. However, the British Bankers’ Association warns that the levy can’t hurt job creation or weaken the strength of financial services in the UK.
The levy, which will be set at 0.04% during the first year, is due to be effective from January next year, generating about £1.5 billion. They will then increase the levy to 0.07% for the 2012-13 year, raising about £2.3 billion, and then from 2013 to 2014 the levy will be increased to raise £2.5 billion. They plan to raise £2.4 billion in 2014-15.
The capitals of the 3 countries released a joint statement saying that they all want financial institutions to make a substantial and fair contribution. The levy may differ in each country to reflect their particular circumstances and tax systems, but it will take into consideration the need to ensure a level playing field. The statement continued that Germany will provide a draft legislation this summer, while France will provide details of the levy in its budget later this year. They all look forward to discussing the proposals more at the G20 summit this weekend in Canada.
The levy isn’t suppose to hit smaller banks and building societies, but foreign banks with operations in the UK will also have to pay it. It is expected that Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC will be the hardest hit by the levy.
This isn’t as bad as what US President Barack Obama wants, though. He is trying to get a 0.15% levy placed on banks’ net liabilities, which would raise up to $117 billion over a 10-year period. However, Congress is still debating on it.