British bank tax closer as government publishes draft law

21st October 2010, Comments 0 comments

Britain published a draft law on Thursday to create a special tax on banks aimed at raising 2.5 billion pounds annually and helping to reduce the country's record deficit.

Plans for the levy, worth 2.8 billion euros or 4.0 billion dollars to the taxpayer, were first announced in June in a joint move with France and Germany, one month after Prime Minister David Cameron's coalition government won power.

"The Government has carefully considered the responses from all interested parties during the consultation to help ensure the successful introduction of the Bank Levy, which is intended to encourage banks to move to less risky funding profiles," the Treasury said in a statement on Thursday.

"The levy is expected to generate around 2.5 billion pounds of annual revenues by 2012-13. The levy will be permanent."

Finance minister George Osborne said on Wednesday that the coalition's aim was to "extract the maximum sustainable tax revenues from financial services."

The legislation will need to be passed by parliament and the government hopes it will become law by the start of next year.

Cameron's coalition has pledged to crack down on the activities of bankers, who it blames for helping to cause the global financial crisis in 2008.

It is shaking up the way they are regulated, handing responsibility to this for the Bank of England, despite warnings from some experts that this risks driving City of London wealth-creators abroad.

Osborne also said he wanted to force banks to sign up to a code of practice which aims to crack down on tax avoidance.

Only four out of 15 leading banks have so far signed up to this but Osborne wants them all to comply by the end of November.

© 2010 AFP

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