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UK banks seeking tax review after HSBC threat

Britain’s largest banks are urging the UK Treasury to start a formal review of taxes on the industry, amid concern HSBC Holdings and Standard Chartered could move overseas to avoid a levy on balance sheets.

The request to Finance Minister David Gauke by the British Bankers’ Association, which represents HSBC and other domestic and foreign lenders such as Barclays and Deutsche Bank, was made in a letter dated June 3, obtained by Bloomberg News. A spokeswoman for the lobby group confirmed the details.

“The time is overdue for a strategic review of the government’s policy for taxing banks, to ensure that the tax regime for banking remains competitive”, British Bankers’ Association chief executive Anthony Browne wrote in the letter.

“We now live in an age that is more interconnected than ever where companies have real choice about where to locate their business activity.”

A review of taxation could persuade HSBC CEO Stuart Gulliver to keep Europe’s largest bank based in London, after it started a formal evaluation of its domicile in response to a rising UK levy and tougher regulation.

The tax on balance sheets, imposed after the financial crisis and which applies to banks’ assets globally, cost HSBC £750m (€1.02bn) last year, more than any other bank.

Standard Chartered, which like HSBC makes most of its earnings in Asia, has said it is also keeping its London HQ under review and it is one of the first issues shareholders have said they want new CEO Bill Winters to examine after he starts next week.

The new Conservative government could disappoint bank executives hoping for a reduction in the levy. Cutting the bank tax so soon after the election would risk angering voters stung by the financial crisis.