Is London really the most-taxed city? Banks accused of cherrypicking data

Lobby group’s figures, shared with John Healey, are misleading as they do not include major rival Paris, say campaigners

A banking lobby group has been accused of cherrypicking data and trying to mislead the British government by claiming a tax rise for banks at next week’s budget would leave London less competitive than rival financial hubs.

UK Finance, which represents banks including Lloyds, JP Morgan and Revolut, commissions an annual report tallying up all the taxes shouldered by a large bank, including corporation tax, social security, VAT and bank-specific levies.

The report, put together by PwC, lists London as the most tax-intensive city, charging a “total tax rate” of 46.2%, compared with 42.2% in Amsterdam, 39.1% in Frankfurt, 29% in Dublin and 27.9% in New York.

The figures have been heavily pushed by UK Finance, including in a recent letter to John Healey, the chancellor, in which it warned that banks could shift business and jobs to rival hubs if threatened with higher bills.

However, questions are now being raised about the lobby group’s data. They include why Paris, one of London’s biggest rival financial hubs and host to many large investment banks including JP Morgan, Goldman Sachs and Barclays, has consistently been excluded from UK Finance comparisons.

Calculations by the Guardian, which were reviewed by a leading accountancy firm, show that the same bank in Paris would face a total tax rate of between 51.6% and 57.3%. That is up to 11.1 percentage points higher than London.

UK Finance said it had considered including Paris but was not able to produce a “robust like-for-like figure using the report’s model bank”.

However, campaigners said it was a notable exclusion, particularly at a time when banks had been looking for ways to protect surging profits and avoid higher taxes, which are due to hit the sector at next week’s budget.

Paul Nowak, the general secretary of the Trades Union Congress (TUC), said: “It’s little surprise that some in the finance lobby are cherrypicking jurisdictions to aid their argument. This is a misleading attempt to make the case against fair taxes … it tells us nothing about the actual taxes paid by Britain’s big banks, which are likely far lower than many competitors.”

Positive Money, a campaign group, said there were wider questions about the report’s methodology, “not least the conspicuous absence of Paris, one of London’s biggest rivals as a financial centre”.

“This raises the question of whether Paris was cynically omitted to allow the report’s sponsor, UK Finance, to claim that the City contributes more tax than any other global financial sector,” said Simon Youel, the group’s head of policy and advocacy.

“Hopefully John Healey is smart enough to see through the wool being pulled over his eyes by City lobbyists, and will follow other countries in raising taxes on banks to claw back enormous windfalls from higher interest rates being paid for by the public.”