Bank Levy Hits Big Banks Harder

So, I see that I was right: the UK has gone forward with a bank levy without a green light from Brussels. Tsk, tsk, tsk...

Did the Coalition Government not see (or not care) that this will pose additional problems for the EU as well as for BRITISH BANKS?

A financial report discussed by the EU's finance ministers December 7, 2010 demonstrates a pretty DARK picture of the potentially high costs and disparities bank levies could cause in the bloc's financial sector.

A bank levy is intended to stop the need for taxpayers to pay for bailouts.

EU finance ministers last year called on the European Commission to come up with a "powerful", integrated proposal to ensure that the financial sector contributes towards its own bailout fund while helping the taxpayers with the national fiscal deficits.

Plans for a bank levy have been struggling along in several EU countries after G20 talks in 2009 and 2010 failed to bring about a multilateral agreement. Given the lack of global and European consensus on how to prevent another financial crisis, some countries have simply forged ahead, on their own without much thought to impact across Europe, far less the rest of the world.

Belgium, Germany, BRITAIN, France, Sweden, Cyprus, Austria, Portugal, Denmark and Hungary have plans to introduce levies as early as next year, but I sure hope they don't.

Why?

The EU proposed 'preventive' bank levy at the December 7th meeting in Brussels.

No doubt, finance ministers paid attention to the severe warning sent by the EU on how haphazard tax application on financial institutions in different countries could be potentially damaging to the entire financial sector and the EU market as a whole, or did they?

In the levy report, the EU speaks about the risks borne by banks who may be taxed twice as countries impose levies that charge both their home and foreign subsidiaries, or that charge foreign banks on their own territory.

The potential for double-charging is extremely high. There are 21 member states hosting EU-owned subsidiaries while nine member states are home to other taxation-relevant EU branches.

It warns that the levies risk seriously unsettling an increasingly uneven playing field in the financial sector and may drive business away from the EU. In wake of the talks, diplomats from EU countries with large financial centres say they will be taking the report's findings seriously and may have to negotiate bilateral agreements to avoid doubling taxation. Has the UK done this?

After all, Germany is singled out in the report as being at high risk of double taxation by French and BRITISH levies.

Yes, it appears that France and the UK already have some sort of agreement on bilateral taxation, but I can't find it (yet). An EU source said Germany would be close behind in laying down bilateral agreements to prevent distortions.

The European Commission has proposed a Bank Resolution Fund – or in financial language, a levy - which takes a different approach to systems that are being introduced in different member states. The proposal's preference for the funds is capitilization, not reduction of national budgets. This seems to have miffed BRITAIN.

The starkest predictions affect banks in the Central and Eastern European region, which have the largest proportion of foreign banks in the 27-member bloc.

Austrian banks would be worst off with a 8.1% hit in Bulgaria, 23.7% in the Czech Republic and 16.7% in Hungary. Wow, this is really a mess!

The highest and most worrying figures belong to Greek subsidiaries abroad, which take a 19.1% hit in Bulgaria and 18.8% in Cyprus. And Greek is already in trouble!!

In other words, this is really a mess!

This bank levying should have been done uniformly - all concerned countries working together to come up with a uniform (Constitutional) Act that would mean - wherever a bank goes in Europe, it will encounter the same rules and not face double taxation.

It's not too late to work together, and it better happen.

Source : http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/12/bank_levy_hits_big_banks_harde.html

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