UK raises bank tax for sixth time as proceeds fall short

By Steve Slater

LONDON, Dec 5 (Reuters) - Britain increased the rate of atax on banks for the sixth time in three years on Thursday asofficial data showed this has repeatedly failed to raise as muchas the government expected.

Finance Minister George Osborne said in his Autumn Statementhe would raise the levy rate imposed on banks from next year andwiden its scope to address the shortfall.

The tax has never raised the 2.5 billion pounds thegovernment wanted to raise each year when it was brought in atthe start of 2011. Britain has said that was an appropriateamount to ensure that banks made a fair contribution aftertaxpayers bailed out the industry during the financial crisis.

Britain is likely to raise 2.2 billion pounds ($3.6 billion)from the tax in the current 2013/14 financial year, or 500million pounds less than a prediction in March, according toOffice of Budget Responsibility (OBR) estimates in theTreasury's statement.

Osborne said the tax will bring in 2.7 billion pounds in2014/15, less than the 2.9 billion pound forecast by the OBR inMarch. Britain raised 1.6 billion pounds from the levy in2012/13 and 1.8 billion in 2011/12.

Osborne forecast the levy will raise 2.9 billion pounds in2015/16, a year later than the OBR forecast in March, and thesame amount each year thereafter.

He will raise the rate of the levy to 0.156 percent fromnext year. The rate applies to the global balance sheets of UKbanks and assets of UK operations of foreign banks.

The government has had to increase it repeatedly because ofa reduction in the size of banks' balance sheets. It wasoriginally set at 0.04 percent.

"As banks continue to deleverage, the rate of bank levy willneed to continue to rise to meet the target yield. At some pointthis could affect pricing and the availability of credit," saidWayne Weaver, UK banking tax leader at Deloitte.

The design of the levy will also change to widen the taxbase, which the Treasury said will help to restore forecasts forfuture years' receipts to target.

HSBC, Europe's biggest bank, has previously saidthe levy unfairly hits banks with big overseas operations andthose that aren't shrinking, and said half its payment last yearwas on non-UK banking activity.

HSBC expects to pay about $800 million under the levy thisyear, up from $571 million 2012.

Standard Chartered, which makes more than 90percent of its profits in Asia, Africa and other emergingmarkets, expects the cost of the levy to rise to $250 millionthis year from $174 million in 2012.

Barclays paid 345 million pounds last year, RoyalBank of Scotland paid 175 million and Lloyds paid 179 million.

Overseas banks with big London operations, such as JPMorgan and Goldman Sachs, also pay sizeable sums.

The tax replaced a one-off tax on 2009 bonuses that raisedover 3 billion pounds but failed in its central aim of curbingbankers' pay.