Not only is the UK government going ahead with its planned tax on banks, it is raising the rate slightly.

Financial secretary to the treasury Mark Hoban announced Thursday that following two periods of consultation, the final legislation contains changes to the planned bank tax. The rate for 2011 will be 0.05%, rather than 0.04%, and it will rise to 0.075% from 2012, instead of the 0.07% announced earlier this year.

The tax is expected to generate around £2.5 billion of annual revenues. “The levy is intended to encourage banks to move to less risky funding profiles, and the £2.5 billion is a fair contribution in respect of the risks the banking system poses to the wider economy, while ensuring that the industry remains competitive,” it said. The levy will take effect in January 2011 and is to be permanent.

“We have consulted on the design of the scheme so that it achieves two objectives: first, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Second, the final scheme design will encourage the banks to make greater use of more stable sources of funding, such as long-term debt and equity, working with the grain of our wider reform program,” Hoban said.

In addition to introducing a bank levy, the UK government is taking action to tackle bank bonuses and exploring the idea of a Financial Activities Tax on profits and remuneration.

Meanwhile an independent commission is considering structural and non-structural measures to reform the banking system and promote competition; and UK regulator the Financial Services Authority is revising its remuneration code to ensure bonuses for significant risk-taking are deferred over a number of years and are linked to the performance of the employee and their firm.

IE