Despite being bailed out by the taxpayer, banks will exploit a legal loophole to avoid paying £19bn in taxes, which the government could use to fund public spending cuts, the TUC says.
A new report published today – The Corporate Tax Gap, says that although banks were bailed out to the tune of £850 million by taxpayers and the Bank of England during the recession, banks can offset their £19n losses between 2007 and 2009 against tax on future profits.
According to the report, banks could soon be paying a lower rate of tax than small businesses. Between 2000 and 2009, the effective corporation tax fell from 28 to 21 per cent.
Since the government plans to reduce corporation tax to 24 per cent, the largest companies in the UK will soon be paying a tax rate of 17 per cent – three per cent lower than small businesses that have to pay 20 per cent.
TUC general secretary Brendan Barber said:
"Small firms have every right to be angry…not only are they finding it hard to get credit from the banks, soon they will be paying more tax on their profits than the banks and other big companies."
When measured against the large scale public sector cuts and benefit cuts, it makes a mockery of David Cameron’s “we’re all in this together” pledge, which now rings hollow.
According to the TUC, the banks' £19bn 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).
Brendan Barber said: "Banks caused the global financial crash and triggered the recession that produced the deficit. Yet not only did they take almost a trillion pounds from taxpayers to bail them out, they are now using the losses caused by their irresponsibility to cut their tax bills for years to come.”
The report, authored by tax specialist Richard Murphy, calculated the double subsidy from the accounts of five UK high street banks – HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS (later Lloyds Banking Group) – and HM Revenue & Customs (HMRC) data.
This is just the sort of article that should be circulated widely, published in the mainstream press. Our banks seem to have shrugged off any criticism (let alone blame) for the mess we are all in right now.
The silence concerning when banks will repay the money they had from tax payers is deafening. This new issue of banks managing to avoid paying tax should be a criminal offence given the circumstances. However it accurately reflects what is important to the people who hold power in this country and it is the same old story of the ‘haves’ have the power to get richer by being in a position to create rules that they can circumnavigate and the poor getting poorer and if we try to avoid paying tax they we end up in prison. Unfortunately the current culture means that we are all prepared to put up with it because ultimately the main issue for most people isn’t that there are some living off the fat of the land; the issue is whether or not you are one of the ones lucky enough to be in that position.