Britain’s biggest banks stand to cut around £19 billion from their tax bills in future because of losses during the economic downturn – despite sharing in an £850 billion bailout from the taxpayer, according to a report for the TUC.
The money, calculated from the “deferred tax” liabilities of the five biggest British retail banks, is almost a quarter of the amount of cuts unveiled in this week’s spending review, and over double the extra £9 billion in tax evasion and avoidance which Treasury Chief Secretary Danny Alexander is hoping to collect over the next five years.
According to the report by accountant Richard Murphy, the banks’ total deferred tax liabilities – tax expected to be paid in the future – collapsed by £18.9 billion between 2007 and 2009. He argues that this can only be because they were accounting for losses as a result of the downturn, but were unable to claim them against their tax bills at the time.
Mr Murphy wrote: “If some £19 billion in tax might not be paid as a result at some time in the future, there is an extraordinary double subsidy going on for these banks.
“Not only were their losses underwritten by the state in 2008, but they will now receive a second round of subsidy when over years to come they will offset those state subsidised losses against the profits they might now make, only because they have been saved for the benefit of their shareholders by the UK government.”
The report also examines the tax bills of the top 50 companies in the FTSE 100, and found that the average tax they paid on their profits has fallen from 27.7 per cent in 2000 – just under the corporation tax rate of 28 per cent – to 21 per cent last year.
If the trend continues as the Government carries out its plan to cut corporation tax year-on-year, Mr Murphy wrote, then the biggest firms will be paying 17 per cent tax in four years’ time – less than the small company rate.
Chancellor George Osborne is seeking to force 15 large banks to sign up to an anti-tax avoidance code, which was drawn up by the last Labour Government and would restrict avoidance by both banks and their customers. Mr Osborne said only four banks have signed up ahead of a November 3 deadline.
