UK's Banks Could Face Tax On Small Business Profits

Amanda Banks, Tax-news.com, London

22 March 2001

The Competition Commission, a watchdog body which makes recommendations to the UK government based on investigations into competition issues, is considering proposals to impose an extra tax on banks that it has found guilty of monopolising services to small businesses.

The Commission's 'monopoly inquiry' is still underway but it accuses the country's main clearing banks of having a clear monopoly when it comes to providing services for SMEs. The banks identified are Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland and the year-long investigation has discovered that between them they control over 80 per cent of the small business market.

The report's findings to date have led the Commission to criticise the banks for restricting competition and overcharging in the SME market. If the banks' profits were deemed to be too high the Commission says it will recommend a tax on past as well as present profits.

The inquiry is not due for completion until June this year when the Commission will decide whether or not the monopoly is against the public interest - if so it could call for a range of 'remedies' including code of conduct guidelines, price regulations, branch divestments and forcing banks to make it easier for customers to move accounts to another bank of their choice.

The Commission has requested public comment on the remedies saying: 'in order to help the Commission assess the wider implications of any recommendations it might wish to propose, in the event that it reached adverse public interest findings, it is now inviting comments on the practicality and effectiveness of the suggestions set out in a Statement of Hypothetical Remedies.'

The complete Statement of Hypothetical Remedies may be obtained from the Competition Commission web site at: www.competition-commission.org.uk/14-01r.htm

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