Banks avoid tax. That’s a matter of fact. They say they should. And they go out of their way to do so – and to help others do so as well.
And they succeed. I have monitored their effective tax rates on current tax due on their profits before goodwill charges for over a decade and in the years 2000 to 2009 the effective tax rates of our biggest banks were:
|Barclays||25.6% (but as low as 9.3% in 2009)|
|HBOS (now part of Lloyds)||20.5%|
Source: http://www.tuc.org.uk/extras/corporatetaxgap.pdf Authored by Richard Murphy
We have lost billions of pounds of tax revenue since over the vast majority of this period the expected tax rate was 30% and these banks did not come near paying it.
How have they done that? There are three ways of suggesting that.
The first is they exploited the UK’s tax rules to the limit. This is one of the thinks units like Barclays Capital do when they supply what is called ‘structured finance’. Most of this is built around what they call ‘tax efficiency’, and which I call ‘ playing the loopholes’. It may be legal, but it’s a long, long way from being acceptable to most people.
Second, they exploit tax havens. I have not done a recent survey of how many tax haven subsidiaries these banks have, but when I last did one in 2008 Barclays had 143 subsidiaries in Cayman, Lloyds had 60 in Jersey, HSBC had 24 in Panama and RBS 10 in Luxembourg. You cannot explain the vast majority of those unless they were for tax avoidance for themselves or clients. (Source http://www.tuc.org.uk/extras/banktaxhaven.pdf )
And finally, they use complexity. So, by having hundreds of subsidiaries in tax havens (over 1,200 in all between Lloyds, Barclays, HSBC and RBS in 2008) banks leave a trail of confusion in their wake, making their tax affairs very hard to assess. That might help explain why the recent Parliamentary Accounts Committee report suggested there may be £25 billion of tax disputed in the UK right now – tax that should be resolved and paid.
Banks thinks such activity pays. It’s time to say that the people of this country who are losing out as a result of this tax avoidance – most of it intended to help trigger executive share bonus schemes and so make bankers and not even their shareholders richer – don’t agree by moving money out of these banks.
Richard Murphy is an economist an author and blogs at http://www.taxresearch.org.uk/Blog/