The government’s economic crime levy could cause law firms’ UK revenue to fall and will play into the hands of rival jurisdictions, the Law Society has said in a strongly worded response to a Treasury consultation.
The Society and the City of London Law Society (CLLS) state that they ‘strongly opposed’ the levy, which aims to raise £100m per year by taxing businesses that are subject to UK money laundering regulations and have annual revenue of over £10.2m.
‘This is not a proposal based on the concept of “polluter pays”,’ the professional bodies state in a joint response. ‘In this case, it is those who are part of the fight against economic crime that are being asked to fund parts of the system. It is more appropriate for such improvements to be funded by taxpayers and other sources such as the assets recovered from criminals and AML fines imposed on the regulated sector.’
The Law Society and CLLS argued that the levy – which is based on a business’ annual revenue – is damaging to the UK’s international competitiveness. ‘When international firms are looking at where to expand, concerns will be raised that the UK has started taxing solicitors merely by virtue of their lawful, and already highly regulated, role in advising clients.
‘This damage to the UK’s reputation and impact on the sector’s international competitiveness could result in an overall loss of revenue if US or international firms are deterred from investing or continuing to operate in the UK. Our competitor jurisdictions, vying for investment, could utilise this to their advantage.’
The Law Society and CLLS added that the current AML regime ‘does not work effectively for solicitors’. They flagged issues with the suspicious activity report regime, and called for ‘long-delayed’ legislation to improve the visibility of beneficial ownership.
According to the draft legislation published last month, an entity with ‘medium’ UK revenue – defined as between £10.2m and £36m per levy year – will be charged between £5,000 and £15,000 annually. Those with ‘large’ revenues – between £36m and £1bn per levy year – will be charged between £30,000 and £50,000 annually. Meanwhile, businesses with ‘very large’ revenues of more than £1bn per levy year will be charged between £150,000 and £250,000.