The Cyprus tragedy should also inspire us to think about its business model for banking. The island is a recent arrival to the world of offshore banking. Just like Ireland and Iceland the rapid growth of its banking sector spurred on by light regulation and low taxation left the islands vulnerable to the fragility of finance.
One concern should be the competition between jurisdictions to attract financial business. Competition for example over tax.
Which brings me to Mr Osborne's recent budget. Banks are not the only firms in the finance sector.
Financial services are about much more than banking. In places like Edinburgh and London, we have a world beating asset management industry. But they are losing business to other places in Europe.
We act now with a package of measures to reverse this decline – and we will abolish the schedule 19 tax which is only payable by UK domiciled funds.
Schedule 19 didn't make the headlines. It is the 0.5% stamp duty paid by asset management firms when investors sell out of the funds.
Scrapping the so-called ‘schedule 19’ tax will bring the UK in line with Dublin, which also charges no tax, and make it more competitive than Luxembourg, which charges a small fee. Dublin and Luxembourg are the UK fund management industry’s main offshore rivals.
There are around £700bn-worth of UK domiciled funds, compared with about €2tn registered in Luxembourg and €1tn registered in Dublin.
I had thought that the government's policy was to re-balance the economy away from finance and towards other sectors, such as manufacturing. Now it seems tax cuts and regulatory reform are being used to boost the finance sector.
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