City banks question if London is truly the world's most expensive place to operate

A major banking industry body is under fire for potentially skewing its tax arguments to the UK government by leaving a key rival out of its comparison set. UK Finance, which represents lenders including Lloyds, JP Morgan, and Revolut, has promoted a report claiming London is the most tax burdened financial center on the planet. The group warned that a tax hike in next week's budget could force banks to relocate jobs and business operations to competitors.

The annual study, prepared by accountancy firm PwC, calculates the total tax cost for a large bank. This figure includes corporation tax, social security, VAT, and specific bank levies. The data shows London imposes a total rate of 46.2 percent. This stands above Amsterdam at 42.2 percent, Frankfurt at 39.1 percent, Dublin at 29 percent, and New York at 27.9 percent. UK Finance highlighted these numbers in a letter to Chancellor John Healey to support its position.

Doubts have surfaced over why Paris was excluded from this list. Paris is a significant competitor to London and hosts major investment banks like JP Morgan, Goldman Sachs, and Barclays. Independent figures reviewed by a top accounting firm suggest a Paris based bank faces a total tax rate between 51.6 percent and 57.3 percent. This places the French capital up to 11.1 percentage points higher than London.

UK Finance explained that it considered adding Paris but could not create a robust like for like figure using its specific model bank. The group argued that maintaining the same five cities ensures consistent comparison over time. It also noted that previous reports showed places like Frankfurt with higher rates than the UK in the past. Campaigners, however, see the omission as strategic, especially as banks look to protect profits before the budget.

Paul Nowak, general secretary of the Trades Union Congress, called the lobbying effort a misleading attempt to argue against fair taxes. He stated that the data does not reflect the actual taxes paid by Britain's big banks, which he believes are likely lower than those of many competitors. Simon Youel, head of policy at Positive Money, questioned whether Paris was cynically left out to allow the group to claim the City contributes more tax than any other global sector. Youel hopes the Chancellor will see through the lobbying and follow other nations in raising bank taxes to recoup windfall profits from high interest rates.

The TUC has proposed that reversing previous Conservative cuts and raising the bank surcharge from 3 percent to 8 percent could generate 2.25 billion pounds annually. Nowak added that the Chancellor has a duty to ask those benefiting from windfall profits to pay a fairer share, particularly as millions of people struggle to make ends meet while banks pay out billions to shareholders and executives.

Reactions from banking leaders have been mixed. CS Venkatakrishnan, chief executive of Barclays, told journalists on Thursday that the financial impact of a tax rise would be bearable and gave the Chancellor his full support. In contrast, Jamie Dimon, head of JP Morgan, warned in May that the bank could scrap plans for a new 3 billion pound London headquarters if Britain became hostile to banks. Dimon met with Andy Burnham and Healey last month to warn that further levies could put investment and jobs at risk. A Treasury spokesperson said decisions on tax are for the Chancellor to set out at fiscal events and that the department does not routinely comment on rumors. PwC has been contacted for comment on the methodology.