Citi boss fires warning at government over banking tax
The boss of Citigroup has warned the government that “money votes with its feet” and there are “very viable” alternatives to London should Andy Burnham decide to hit the banking sector with higher taxes.
Dame Jane , a Scot credited with turning around the third largest bank in the US, said she was “concerned” at another charge on banks in Britain.
Maintaining its base in the UK had become more difficult to justify due to the outsized charges levelled on the sector compared with countries like Germany, France and the US, she said.
“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.”
The comments add to a growing chorus of concern from banking bosses after a booming earnings season in which equity trading and investment banking income was pushed to near record highs by the turmoil shaking global markets.
Banking tax fears grow after blowout earnings
Both Barclays and JP Morgan have already warned the government against another levy on banks.JP Morgan boss Jamie Dimon threatened to ditch the American bank’s planned Canary Wharf headquarters if tax rates in the UK became more 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.”
She added that she was worried by the government’s failure to rule out a potential tax on wealth and comments 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 CityAM. “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 referred to the high tax rate under the Labour government 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 added there was a perception among business leaders in the US that the UK was “diminished” and some of the political upheaval in the country had damaged its global standing.
“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.
‘Now we’ve got to show what we can do’
Fraser’s comments, which come on her first trip back to the UK after being made a dame in the King’s birthday honour’s list in June, will hold weight with the government given her status as a rare Brit at the summit of corporate America. Born in St Andrew’s, her ascent to the top of Citi in 2021 made her the most powerful woman on Wall Street.
She has been credited with turning around Citi by selling off non-core businesses and sharpening its focus on areas where it has a “right to win”, particularly wealth management, commercial and investment banking.
Analysts said its most recent set of results showed the overhaul was paying off. Revenue in its trading division surged 45 per cent to $2.3bn in the second quarter. Four of its five main divisions topped estimates in the first half of the year.
“It’s not just that we got ourselves into shape and we built the engine, now we’ve got to show what we can do,” Fraser said today.