Bank profits will be cut after new European law



Eurozone

Eurozone

Across the continent, banks may witness as much as a quarter of their profits vanishing from their earnings after 10 new levies come into effect.

Topping the list could be France’s Crédit Agricole, which may see 24 percent of its pre-tax profit vanishing from its income statement, according to the European Union report tabled at last months European Council’s meeting. The report was prepared for last month’s general secretariat meeting and was not widely circulated.

The Dutch group ING will pay around 21 percent in taxes – the second highest followed by Denmark’s Danske Bank – which will pay around 15 percent; projections made by BvD Bankscope indicate.

However, Crédit Agricole disputed the report saying its French tax liability amounts to €64 million, just 4 percent of its pre-tax profit of €1.5 billion in 2009. It further added that its exposure to other European levies was miniscule.

The UK, Germany and France along with seven other European countries like Sweden, Austria, Portugal, Hungary, Cyprus, Belgium and Denmark have either introduced similar taxes or are due to introduce them soon.

Britain has introduced a new tax from Jan 1, 2011, which fixes the banks liability to 0.05 percent of its net ‘safe’ liabilities such as insured deposits and due to go up to 0.75 from April 2011, when the new fiscal starts.

The different member countries have tweaked the levies, but overall the impact will be around 0.05% on the balance sheet liabilities.

Banks had earlier complained that due to similar nature of the proposed levies, they will end up paying multiple taxes on same income across different jurisdictions.

Till now only France and the UK have agreed to a double taxation avoidance treaty under such scenarios.

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