The whole debate around bank bonus taxes has become a tad complicated, not least because of potential confusion between last year’s one-off 50 per cent tax on bonuses and the new “banking levy” – which will be based on balance sheets.
Ed Miliband and Alan Johnson this morning called for the bonus tax – which last year raised £3.5bn – to be used again this year. Their argument is that the new levy will not raise enough cash this year compared to the generous bonus round.
To understand where Labour is coming from you need to see the estimates for how much the bank levy will raise for the coming years against last year’s tax. The figures below do suggest that there will be a rather inexplicable fall – described by Miliband as a “tax cut” – this year before the figure rises once again in 2012.
2010: £3.5bn 2011: £1.25bn 2012: £2.3bn 2013: £2.6bn 2014: £2.6bn.
The figures support Miliband/Johnson’s demand for an extra top-up on this year’s levy – if not to the tune of the £3.5bn they are suggesting.
UPDATE: A coalition official has been in touch to argue that £3.5bn was never raised by the government last year – instead the figure was more like £2bn.
In fact this discrepancy was the subject of a row last October when former City minister Lord Myners claimed there was a “black hole” of more than £1bn in the receipts from the tax. The coalition claimed that it had clawed £2.3bn from banks through the tax – but figures from HM Revenue & Customs suggested it had raised £3.5bn.
The slightly convoluted explanation from the Treasury was that the £1.2bn gap stemmed from an “assumption” that the banks had paid lower taxes – and therefore the exchequer had lost out on income tax and national insurance contributions.
Jim Pickard
Kiran Stacey