Losses suffered by Britain’s largest banks as a result of the global credit turmoil will add further pressure on the public finances by cutting the amount of corporation tax paid by the financial services industry.
Figures compiled by the Financial Times show that the £10bn of writedowns unveiled in recent weeks by Royal Bank of Scotland, HBOS and Lloyds TSB will knock more than £2.5bn off the three banks’ combined tax bills. Though some of the losses will be booked outside the UK, the majority is expected to come at the expense of British taxpayers.
The figure, which represents more than 5 per cent of the Treasury’s forecast for corporation tax receipts in the 2007-08 fiscal year, underscores the dependence of the public finances on the banking industry, which has accounted for a growing proportion of the tax base in recent years.
In 2005-06, the most recent year for which a breakdown is available, the banking, finance and insurance sectors paid corporation tax of £11.6bn, about a quarter of the total. >>>
UK bank losses to hit public finances
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