The chief executive of Citigroup has warned Prime Minister Andy Burnham not to impose higher taxes on the banking sector, saying that "money votes with its feet."
Dame Jane Fraser, a Scot credited with transforming the third largest bank in the US, stated she was "concerned" about the prospect of further charges on British banks. She argued that sustaining the bank's presence in the UK had become increasingly difficult to justify, given the disproportionate levies imposed on the sector compared with nations such as Germany, France and the US.
Tax rate disparity
"Money votes with its feet," Fraser told reporters. "And when you have a tax rate in London which is up around to the 48 per cent level and you're competing with New York at 27 per cent, or Dublin at about 28 per cent – even Frankfurt and Paris are lower – it makes it a tougher decision. It's already one of the most expensive centres in the world."
Her remarks add to a swelling chorus of alarm from banking chiefs following a bumper earnings season, in which equity trading and investment banking revenues were driven to near-record highs by the turbulence gripping global markets, reports City AM.
Banking chiefs' concerns
Both Barclays and JP Morgan have already urged the government to refrain from introducing another levy on banks. JP Morgan chief Jamie Dimon threatened to abandon the American bank's proposed Canary Wharf headquarters should tax conditions in the UK become increasingly punitive.
"There are very viable alternatives," Fraser said. "And the UK's important. It's got talent, it's got infrastructure, it's got pretty sensible regulatory capabilities and the like. But that difference – and I hate to be Scottish – it gets overcome pretty quickly."
Wealth tax fears
She expressed concern over the Government's failure to rule out a potential wealth tax and remarks from now Government ministers who have called for capital gains tax to be equalised with income tax.
"You can't afford everything. You can't have your cake, eat it, and not put on calories," she said in response to questions from City AM. "I think some of the pieces we've just got to look at [are] how do you re-energize the country around incentivising people for working, making it attractive to do so." She referenced the elevated tax rates under the Labour administration in the 1970s as a "disaster for the country".
"You don't grow and you don't build businesses. So I think there's a balance," she said.
She noted there was a view amongst American business leaders that Britain had been "diminished", with some of the political turbulence having undermined its international reputation.
"We want the UK to succeed. We want to see some of the things that have held the country back getting taken down by the government, and that the country is fulfilling its potential," she said.
Influence and context
Fraser's remarks, delivered during her first visit back to Britain since receiving her damehood in the King's birthday honours list in June, will carry influence with the Government given her position as a rare British figure at the pinnacle of corporate America.
Her comments come as a key figure in Burnham's cabinet was thrown into the spotlight on a trip to USA. Ed Miliband is in Washington to meet US counterpart Marco Rubio. The Foreign Secretary ignored questions about whether he still thought the president was an “idiot, a racist and a misogynist” as he met with America’s top diplomat. The pair are set to discuss efforts to reopen the Strait of Hormuz, the Ukraine war and the situation in Gaza.
