Louise Beaumont, chair of techUK's Open Finance and Payments Working Group, has blasted Chancellor Rishi Sunak's plans to to slash the bank profit surcharge levied on the UK's biggest banks from eight percent to three percent, describing the action as an act of "self-flagellation" that would significantly damage the UK's fintech industry.
Under the plans, which are set to be revealed in Sunak's budget statement Wednesday, digital banks stand to pay six per cent more corporation tax and miss out on the surcharge reduction, as it is only levied on profits over twenty-five million pounds.
"High growth, high investment companies usually operate losses, hence they are missing out," states Beaumont, in an op/ed piece for CityAM. "This means that digital banks would seem to be facing a tax rise of six per cent compared to the one per cent facing the established banks."
She says the disparity casts a dark shadow on previous Government rhetoric on the importance of innovation, competition, and the continuing development of the UK’s fintech industry.
Speaking at FinTech Week in April 2021, Sunak highlighted what he saw as the driving force behind growth in financial services, “If we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”
"It seems this sentiment has perhaps been forgotten," writes Beaumont. "Digital banks and their fintech compadres drive technological advancement. Their innovations have seen the UK establish itself as the world’s leading fintech market and have forced legacy banks to begrudgingly adopt new technologies into their offerings. Would the big banks have started offering digital services had it not been for Monzo, Starling, and Revolut?"
Investment of £13.5bn into tech industries in the first half of 2021 saw the UK produce twenty new unicorns. This represents a rate of almost one new unicorn being created a week. Of these twenty companies, eleven were financial technology firms, attracting £4.2bn of investment.
"Slapping a tax increase of 6 per cent onto such firms could well deter investment and reduce opportunities for rapid scale-ups," states Beaumont. "The tech industries, including fintech, remain nascent. Government ministers need to break free of old patterns of thinking (and lobbying) that prioritise the big banks. An extension of the proposed tax benefits to digital banks and fintech companies is one basic, and seemingly obvious policy to everyone except the Treasury."