The boss of Santander has branded the UK’s tax regime on banks as making “no economic sense” as speculation mounts that the industry could be turned to for a quick cash grab if the Labour government lurches to the left.
Ana Botín, the chief executive of the Spanish banking giant, has said the UK tax regime should not look to specifically target lenders, which already face an outsized rate.
“The question is, why single out the banks in particular and impose additional taxes?
“We already pay a corporate tax rate of around 30 per cent, our profit margins are nowhere near those of monopolistic players, and we’re not reaping windfall profits,” she told the Financial Times.
City banks are subject to a sector-specific levy and a surcharge that sits on top of corporation tax as well as VAT, property taxes, national insurance and other taxes levied on businesses.
The bank chief added that if the government was looking for “sectors earning outsized returns, there are other places to start”.
It comes after the Santander chief met Chancellor Rachel Reeves last week “to discuss the power of the UK’s financial services sector”.
Chatter around a tax raid on the banks has re-ignited following speculation Prime Minister Sir Keir Starmer’s time in Number 10 could be coming to an end.
Reeves has avoided targeting banks in her last two tax-raising Budgets, though it is expected a more left-wing candidate would be less forgiving. Former Deputy Prime Minister Angela Rayner – and viewed as one of the most likely successors to Starmer – had previously lobbied Reeves to hike the sector-specific surcharge to five per cent from three per cent.
Santander chief warns on growth impact of bank tax
Tax fears have been further amplified after a handful of lenders upgraded their income targets for the year on the back of an elevated interest rate path following the conflict in the Middle East. Analysts pointed to the industry as looking “ripe for a cash raid” after profits rose in the first quarter.
Botín argued such a move would run counter with the government’s ambitions for economic growth.
“Taxing banks more heavily than other companies makes no economic sense,” she said, adding that bank lending to businesses helped drive investment and job creation.
The Santander boss – who completed the mammoth takeover of high street unit TSB earlier this year – becomes the latest in a string of lenders to speak out against a potential tax hike.
Barclays boss CS Venkatakrishnan – known as Venkat – said following the firm’s first quarter results that “banks in the UK are more highly taxed than they are in any other major jurisdiction.”
He pointed to the sector’s 46 per cent rate in the UK, compared to Europe ranging between 29 per cent to 40 per cent and the US’ around 20 per cent.
Meanwhile, Lloyds’ finance boss WIlliam Chalmers said: “I would say that the profitability of banks is an incredibly important component of a successful economy”.
The Treasury said: “Banks play a crucial role in growing the economy, helping firms to invest and supporting public finances.”
