Chapter 5: Banks and tax: recent UK experiences
The financial and economic crisis post 2008 kept banks in the spotlight and gave rise to considerable debate as to how to regulate banks more appropriately and whether they are paying sufficient taxes to make an appropriate contribution to the public finances relative to their size and importance for the economy. The extent to which banks should be subject to special tax regimes also became a live issue post 2008 in order to reflect the role that banks play and the risks they pose to the economy more generally. This chapter will look at the way banks are taxed in the UK and how the government has sought to ensure that they make an appropriate contribution to the public finances to reflect their importance in the UK economy, the risks that they pose and the implicit subsidies they receive by not being allowed to go bust as would be the fate of other businesses that fail – the ‘Too Big to Fail’ syndrome. I shall not review the wider regulatory banking debate nor will I examine the international moves to ensure that banks are better capitalised in the future – the Basel 3 developments put forward under the aegis of the Bank of International Settlement (BIS). Basel 3 is designed to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, improve risk management and governance and strengthen banks’ transparency and disclosures.
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