Following on from my post this morning attacking those individual bankers who deliberately avoid taxes, it’s only fair to draw attention to the corporate tax avoidance being carried out by UK banks.
Even though taxpayers rescued them, british banks will offset their losses during the crisis against the tax bills for profits made since. This could amount to a total avoidance of £19 billion, or more than £1,100 for every family in the UK.
A report out today – The Corporate Tax Gap, by Richard Murphy of Tax Research UK– says that banks will offset the £19 billion of tax losses between 2007 and 2009 against paying tax on future profits, despite receiving a bailout from taxpayers of £850 billion during the recession.
The report has calculated this double subsidy from examining the accounts of HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS, as well as HMRC records for the period.
Corporate Tax Gap is named for the difference between rates of tax set by the Government and the rates companies actually pay. That gap has grown by an average of 0.5% a year over the last decade and is leading to banks paying a lower rate of tax than most small businesses in the UK. Over that decade the effective corporation tax fell from 28% to 21%, despite the headline rate cut being only 2% – from 30 to 28%.
As the Coalition are now planning to cut the headline corporation tax rate to 24%, the UK’s biggest companies, including the high street banks will be paying an effective tax rate of only 17%. That’s 3% lower than small businesses, who just don’t have the income and knowledge to make use of the loopholes in current tax law. Because of that, according to this report, the UK will actually soon have a regressive corporation tax regime, where the bigger businesses pay lower tax rates than the smaller ones.
It may not sound like the end of the world, but the banks’ £19 billion double subsidy could pay for the following cuts between now and 2015:
* switching the indexation of benefits from RPI to CPI (£5.84 billion);
* housing benefit (£1.77 billion);
* tax credits (£3.22 billion);
* child benefit for higher rate taxpayers (£3 billion);
* estimated cuts to the science research budget (£3 billion); and,
* estimated cuts in HMRC resources to tackle tax avoidance (£2.1 billion)
It was banks that caused the financial crisis around the world which led to the current deficit. They happily took almost a trillion pounds from taxpayers for a bailout, and now they are using losses brought about by their own irresponsibility to avoid paying tax for what could be years.
Compared to this massive loss of tax revenue, the Government’s planned bank levy is tiny. While the banks happily avoid billions in taxes and return to massive bonus levels, the rest of us face the biggest cuts since the 1920s, the most job losses since Thatcher, and an increase in VAT that will hit the poorest hardest. Even small business owners are getting stiffed. At the same time that banks are refusing to give them credit, they are going to end up paying more tax on their profits than those same banks.