Tax Analysts Blog

Both U.K. Parties Looking at New Bank Taxes

Posted on Dec 7, 2009

In dire need of cash and politically palatable tax cuts, U.K. politicians are looking at new taxes on banks. According to reports from many sources -- including the BBC, the London Times, the Financial Times, and Bloomberg -- the soon-to-be-released U.K. Pre-Budget Report may include a one-time windfall tax on bank bonuses.

The British Banking Association does not like the idea. At least the BBA can take some consolation that Chancellor of the Exchequer, Alistair Darling, has ruled out a tax on bank profits.

In a development that might strike U.S. conservatives as odd, U.K. Conservatives -- the likely winners of the May 2010 election -- are not ruling out a tax on bonuses either. Even more intriguing is their idea to not allow current bank losses to offset future bank profits (reported in today's WSJ and FT).

Britain has worse budget problems and a proportionately larger financial sector than the United States. But if new bank taxes come to the forefront of the upcoming U.K. election, the idea is increasingly likely to get serious attention in the United States.

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