The UK has introduced a raft of new taxes on its banking sector in recent years and the sector is unhappy about the scale of the burden.

UK banks will have to shoulder an additional £40 billion ($62.5 billion) in taxes by 2020, paying an extra £4 billion per year from 2010 to 2020 on top of other charges, burdening an industry that contributes significantly to economic growth, a lobby group says.

The figures came yesterday from the British Bankers’ Association in a detailed analysis of the amount of tax banks are paying.

Last week, UK finance minister George Osborne sought to allay bankers’ complaints about an existing levy by promising to phase it out and replace it with a charge on profits rather than simply tying it to the size of a balance sheet. However, the phase-out of the old levy and the introduction of a new charge overlaps, and some commentators have suggested this is still a significant cost. There had been speculation that banks such as HSBC, which have large business lines abroad, might move their headquarters outside the UK.

The existing bank levy was brought in during 2011, in the wake of the 2008 financial crisis and the taxpayer bailouts of firms such as Lloyds Banking Group and Royal Bank of Scotland.

The BBA said it was concerned that banks are being unfairly singled out for tax.

"Banks expect to pay their fair share of tax. But they are concerned that they are being singled out for new punitive taxes every year," the BBA's chief executive, Anthony Browne, said.

“While it is good that the government wants to amend the bank levy so that it no longer penalises global UK banks these changes will not come into force until 2021 under the next government. This has led some to question whether they can believe that this reform will ever actually come into force. Banking is one of the most globally mobile businesses, that is why we would like the UK government to hold a strategic review of bank taxation to ensure we remain competitive,” Browne added.

The BBA said there have been several taxes aimed at banks in recent years:

-- The bank payroll tax, known as the bonus tax, raised £3.4 billion in 2010-11 (HMRC, 2014).
    
-- The bank levy, which was introduced in January 2011, applies to all banks and building societies operating in the UK.  

-- The government has restricted the amount of bank profits that can be offset by carried-forward losses to 50 per cent.

-- The government is legislating to make banks’ customer compensation expenses non-deductible for corporation tax purposes, effective from 8 July 2015. This is forecast to increase banks’ corporation tax payments by around £1 billion over the next six years (HMT, 2015).

-- In July, there is a new bank corporation tax surcharge, a supplementary tax on banking sector profit of 8 per cent to be levied on banks from January 2016. The tax will not apply to the first £25 million of profit within a group. Combined with the announced changes to the bank levy, banks will now pay an additional £1.7 billion in tax over the next six years.