British banks pay extra £800m tax

Britain imposed an extra £800 million tax on banks this year, taking a harder line on the sector as it negotiates a deal to curb…

Britain imposed an extra £800 million tax on banks this year, taking a harder line on the sector as it negotiates a deal to curb bonuses and free up business lending.

The government today said it will impose the full amount of a planned levy on bank balance sheets this year, instead of phasing it in.

UK banks like HSBC and Barclays and the UK operations of banks from other countries, such as Goldman Sachs and Deutsche Bank will pay a total £2.5 billion in 2011.

The Treasury had initially planned to raise £1.7 billion from the levy this year and the full amount from 2012.

Chancellor George Osborne said he hoped that making the tax position plain would aid any possible deal with banks on increasing the amount they lend to businesses and limiting bonuses - known as Project Merlin.

"I'm still confident we can secure a deal with the banks on seeing an increase in lending to small businesses and see that bonuses are lower this year than last year," he said on BBC radio.

Britain said last year it would introduce a levy on banks that would raise about £2.5 billion a year by 2012-13 when it was fully running. "That (extra £800 million) is a substantial sum of money that will help the government and help Britain deal with its budget deficit," Mr Osborne said.

The Treasury said it wants banks to make "a fair contribution" to the potential risks they pose to the financial system and to encourage them to move to less risky funding.

From May, banks will be charged a levy of 0.075 per cent for short-term chargeable liabilities and 0.0375 per cent for long-term equity and liabilities.

The levy will be set at 0.1 per cent for short-term liabilities and half that for long-term liabilities for March and April to make up for a lower rate in January and February.

The tax applies to the global balance sheets of UK banks.

UK bank shares fell. By 0923 GMT Standard Chartered was down 1.5 per cent, HSBC was down 0.3 per cent, Barclays down 1.4 per cent, Royal Bank of Scotland down 1 per cent and Lloyds Banking Group down 0.6 per cent.

Reuters