Is London really the most-taxed city? Banks accused of cherrypicking data

Calling London the “most-taxed city” refers to the combined burden calculated for a large model bank, not simply the headline corporation-tax rate. UK Finance’s annual report adds several taxes together to estimate how much of the bank’s activity goes toward taxes. This matters because the figure is being used to argue that London could lose business if taxes rise.

The report, prepared by PwC, includes corporation tax, social security, VAT and levies aimed specifically at banks. It gives London a total tax rate of 46.2%. That is higher than the reported rates for Amsterdam, Frankfurt, Dublin and New York. The calculation therefore presents London as less tax-competitive than those four centres.

The measure is not the same as the tax actually paid by every British bank. Campaigners say it may tell little about real payments, and they question the report’s omissions and methodology. UK Finance says it uses a consistent model bank to compare cities over time.

London’s reported rate is 46.2%, making it the highest-taxed location in UK Finance’s five-city comparison. The ranking is based on the report’s combined measure for a large model bank. It is not a simple list of national corporation-tax rates, because several other charges are included.

Amsterdam is next at 42.2%, which is 4 percentage points below London. Frankfurt is 39.1%, or 7.1 points lower. Dublin is 29%, while New York is 27.9%. London’s reported rate is therefore 18.3 percentage points above New York’s figure, the lowest in the comparison.

These gaps helped UK Finance warn that a tax rise could make London less competitive and encourage banks to move work or jobs. However, campaigners argue that the comparison is selective. They point especially to Paris, which was not included and could produce a higher rate than London.

Paris was left out because UK Finance said it could not produce a “robust like-for-like figure” using the report’s model bank. The group also said the five included cities had remained consistent, allowing comparisons over time. It denied that Paris was excluded because of its tax position.

Calculations by the Guardian, reviewed by a leading accountancy firm, estimated that the same bank in Paris would face a total tax rate between 51.6% and 57.3%. Even the lower estimate is 5.4 percentage points above London’s 46.2% rate. The upper estimate is 11.1 points higher. Paris would therefore rank above London as the most tax-intensive city in this comparison.

That result weakens UK Finance’s warning that London is uniquely burdened against major rivals. Campaigners called Paris’s absence conspicuous, especially because it is a major financial hub hosting large investment banks. UK Finance has not added Paris to the published comparison.

UK Finance commissioned the annual report and pushed its figures publicly, including in a letter to John Healey. It represents banks such as Lloyds, JP Morgan and Revolut. Its interest in the debate is clear: it warned that higher taxes could move banking activity and jobs to rival financial centres.

PwC put the report together. Its analysis calculated the model bank’s combined exposure to corporation tax, social security, VAT and bank-specific levies. The resulting figures showed London at 46.2%, ahead of the four cities included. PwC was contacted for comment but had not responded in the article.

This creates a dispute over both message and method. UK Finance is speaking for the banking industry as the chancellor considers higher taxes. Campaigners accuse the lobby group of selecting jurisdictions that support its argument. UK Finance says the cities were kept consistent and Paris’s omission reflected difficulties with the model, not its relative tax level.

The central risk raised by banking leaders is that higher taxes could make London less attractive than rival financial hubs. Banks might move some business, investment or jobs elsewhere. That could weaken London’s position as a financial centre and affect plans for new offices or headquarters.

The clearest example is JP Morgan. Jamie Dimon warned in May that he could scrap plans for a new £3bn London headquarters if Britain became “hostile” to banks. The headquarters had been announced after Rachel Reeves spared the sector from a tax rise the previous year. Dimon also warned that further levies could put investment and jobs at risk.

The threat is contested. Barclays chief executive CS Venkatakrishnan called the likely financial hit “bearable” and gave the chancellor his full support. The article does not establish that jobs or headquarters will move. It shows instead that tax decisions are already influencing public warnings and investment discussions.

The bank surcharge is an additional tax applied specifically to banks. Ordinary corporation tax is the general tax on company profits, while the surcharge is a separate charge targeted at the banking sector. The article presents both as parts of the wider tax burden measured in UK Finance’s report.

The TUC wants the surcharge increased from 3% to 8%. That is a five-percentage-point rise in the surcharge rate, although the article does not state the exact extra amount each bank would pay. The TUC says reversing Tory cuts and making this increase could raise £2.25bn per year.

The proposal reflects campaigners’ argument that banks have benefited from windfall profits linked to higher interest rates and should contribute more. Banking groups warn that higher bills could damage competitiveness, jobs and investment. The chancellor is expected to set out tax decisions at the next budget, but the Treasury has not commented on proposals.

The same bank can face different tax burdens because countries set different rates and rules for company profits, employment costs, consumption taxes and financial-sector charges. The article identifies all four categories in the report: corporation tax, social security, VAT and bank-specific levies. Their combined effect varies from one financial centre to another.

For example, UK Finance’s model gives London a 46.2% total tax rate, compared with 42.2% in Amsterdam and 27.9% in New York. Guardian calculations put Paris between 51.6% and 57.3%. Those differences arise from the tax rules and charges applied in each jurisdiction, as represented by the model.

The comparison is not a bill paid by every bank. It is an estimate for a large model bank, and campaigners question whether it reflects actual payments. UK Finance says consistent cities and a consistent model support comparisons, while critics say excluding Paris distorts the picture.