Barclays » Tax Research UK

The banks are as great a threat to our national security as a foreign enemy. We collect intelligence on hostile powers. Why should we not collect it on the hostile City?

He’s right in his analysis: the banks, and let’s be honest about this, some other parts of the financial services industry and big business, are a massive threat to our well being. What they promote is detrimental to the well-being of the vast majority of people in this country.

And yet it’s assumed they’re the innocent party. Clear evidence of this came yesterday. As I’ve noted, I gave several interviews for the BBC on Barclays’ tax. All I am asking Barclays to do is to pay their tax in accordance with the letter and spirit of UK law – something they have signed up to do but which i doubt they have done in the past. And yet the BBC were tortured in their attempts to link me to UK Uncut, or not (as is the case – as I made clear – I have sympathy but am not a member – however that might be defined). As was explained to me that’s because they had to make clear to viewers “I have opinions, but of course most accountants who come on are just commentators”.

No they’re not! Most accountants who go on air come from the big firms – and they’re the architects of the tax abuse we are witnessing and the failure to account of which we are seeking the consequences. They’re not innocent, unbiased parties. They’re profoundly political, utterly conflicted by self interest and wholly vested in maintaining the status quo.

But because I simply ask that people comply with the law as parliament intended it my position has to be explained.

Cohen is right – these people have even captured the BBC, and it’s time we reclaimed the state for the benefit of the people of this country – because right now it is being openly abused by those who really are its enemies.

5.15am on Saturday

Barclays 12 Responses »

Feb 192011

I love living in Norfolk. There’s noting on earth would take me back to living in London now.

But having to get up at 5.15am to get to the BBC to do Breakfast Television on a Saturday is a challenge.

Worth it though when the story is about Barclays, and their not being anything like the tax we could reasonably expect of them.

Barclays – paying tax, but where?

Banking, Barclays, Country-by-country, Tax avoidance, Tax justice 29 Responses »

Feb 192011

It is I think quite fair to say that a great many people who callled me yesterday afternoon were stunned by the news that Barclays paid just £113 million in tax in the UK in 2009.

Barclays made £11.6 billion in 2009 – £4.6 billion on ordinary activities and the rest from selling Barclays Global Investors.

It’s total tax bill on this (and I’m ignoring deferred tax because there is no evidence it will be paid) was about £1.3 billion – of which just £200 million or so related to Barclays Global Investors’ sale due to the absurdly generous rules on capital gains by corporates introduced by Gordon Brown, and the rest realted to the ordinary activities. I’m going to leave aside Brown’s absurd generosity – but note that this error needs to be corrected – and concentrate on the current tax situation.

First note that Barclays does not pay tax at the expected rate of 28%. It pays tax at 23% – by its own admission. All its tax planning activity delivers some benefit.

But second, note from its accounts that its biggest retail operation is in the UK. Admittedly its biggest commercial loan book is in the US, but also note that 78% of its profits (or thereabouts) come from Barclays Capital which, if publicly available information is to be believed is largely located in London and New York. And yet, just 10% of Barclays worldwide corporate tax is paid in the UK.

So here we have a UK bank, seemingly able to offset all its head office costs, all its losses on Barclays Corporate, and maybe (i’m guessing here) some of its losses in Europe (after all, relocating losses isn’t hard for a bank) into the UK to offset what profits it does make here, and even so seeming to pay a disproportionately low amount of tax in this country. A staggeringly low anount of tax in fact.

I note the bank has said:

The corporate tax affairs of an organisation with the global footprint of Barclays are complex and not reducible to simplistic comparisons. Any link between Barclays Group profits and the amount of tax paid to the UK government is inappropriate – there is no direct correlation between the two.

Well, let me be candid. I don’t believe them. Oh yes there is a link – a very real and very obvious link, and they’ve chosen, in my opinion, to engineer that link to ensure that they pay the least possible in the UK, exploiting on the way I suspect our lax attitude to offshore, our lax rules on the offset of interest costs, our lax rules on losses and the lax rules we have on head office operations.

Two things are needed. The first is not territorial taxation as the Tories propose – that will make Barclays tax even lower than it is now – but a rigorous review to make sure that the profit really arising in the Uk is actually taxed here, which by Barlcays’ own admission is far from the case now.

Second, we need the information to hold banks to account for what they do. This is, of course. country-by-country reporting. We must have banks report on were they operate, without exception, what profit they declare in each such location and how much tax they pay there as a result. It’s really very basic information. And yet we do not have it.

If Barclays want to say paying tax is a measure of their social contribution, that’s fine. But unless they tell us where they pay tax it’s meaningless. And the abuse of the UK will go on.

Open the books Barclays. That’s the message. And Lloyds, RBS, HSBC and every other major corporate too.

Project Merlin and tax – another empty promise

Banking, Barclays 3 Responses »

Feb 092011

The tax clauses of the Project Merlin greement with the banks say:

2. 1. The four banks have committed to abide by HMRC’s new UK Code of Practice on Taxation for Banks, requiring compliance with both the spirit and the letter of the tax law.

2.2 A public statement of their expectation to contribute a cumulative £8 billion of total tax take (covering direct and indirect sources, including the Bank Levy and VAT) in 2010 and, on the same basis, £10 billion in 2011.

2.3 Each bank’s tax payment expectations, as set out above, will be subject to the economic environment and its profitability. The banks expect that their overall tax contribution to HMRC / HMT will grow as performance strengthens and profits grow; as an indication, they expect they could contribute a cumulative total tax take over the 5-year implementation period for the Spending Review actions (spanning the period 2011 to 2015) that is a significant multiple of the 2010 figure noted above.

Hang on….the total UK current tax bills of the four for which I can easily get data (I haven’t got Santander) was about £960 million (allowing for translation of currencies). So where does £8 billion come from? Surely we’re not including PAYE, are we? Is the Treasury that daft?

What are these taxes they’re going to pay? How will we know they have? Who will check the numbers? And can we have country-by-country reporting to prove it please?

Right now this is just another empty promise.

Lo and behold – the banks say there’s a spirit to tax law

Banking, Barclays, Ethics, Tax avoidance 2 Responses »

Feb 042011

Citywire carries a fascinating report this morning, which I fear I will quite at length, but it’s important. It says:

Rival investment banks have decided against following Barclays into creating tax-free structured products for wealthy clients for fear that HM Revenue & Customs (HMRC) could take a dim view on them.

Barclays has been selling tax-free structured products to high net worth clients for more than a year via its Barclays Wealth division.It is understood Citigroup has also begun looking at similar structures for its private banking clients and is now operating in this space.

However, several rival investment banks have told Citywire they deem these products to be ‚Äòtoo aggressive’ and although they are legal, the banks fear that HMRC might ultimately take a negative view on the tax treatment of the products.

It is understood the products are simple structures, such as auto-calls. The client undertakes the credit risk of Barclays, and the return is based on the performance of an index, such as the FTSE 100. However, the twist is that the investment bank uses gilt options for structuring and any profits on maturity of the product are delivered as gilts, meaning payments would not be liable to income or capital gains tax. At present, gilt options – unlike other types of options – are tax-free.

Allen & Overy – the global law firm that is actively involved in assessing the tax treatment of structured products – is understood to have reassured rival investment banks that there is a high probability these products would be deemed tax-free by HMRC.

This it should be noted is standard aggressive tax avoidance behaviour. The rate of tax for the highest-paid in the UK was recently increased to 50% and as a result this type of product has been created to assist those faced with such a tax charge to avoid their obligation to society. Those to whom the product is sold are offered the reassurance that a major firm of lawyers has given assurance that the scheme is legal, an assurance for which the purchaser or the bank selling the product will have paid dearly, but which is deemed to be a price worth paying because this then means that if the scheme is subsequently challenged by H M Revenue & Customs those who used it can claim that they took reasonable steps to ensure its legality and as a result will not suffer, in most circumstances, a tax penalty for the additional tax charge that will then arise. note that this contrasts sharply with the arrangement for most ordinary taxpayers who cannot afford such assurance. They pay penalties even if they make honest mistakes on their tax returns which are subsequently discovered by them or the Revenue. The adage that there is one tax law for the rich and one for the rest is undoubtedly true.

That though is not the key point in this case. What is really interesting is that Citywire goes on to note that:

However, one head of structured products at a major investment bank said: ‚Äò[We believe it is] against the spirit of the tax rules. We just backed off completely. It’s one of those things where the reputational risk is just so great.’

A director at another rival investment bank said: ‚ÄòIf you go into technical [details], it does work, but that doesn’t mean it is in the spirit [of the law]. I think it’s too aggressive,’ while a senior director at a third investment bank, added: ‚ÄòA lot of clients [who bank with Barclays Wealth] showed us this, but we took the view that it was too aggressive and that if the Revenue saw this, they would say so.’

HMRC declined to comment specifically on individual structured products with gilt options, citing tax-payer confidentiality. However, it said: ‚ÄòHMRC has a responsibility to ensure everyone pays the right amount of tax due.

‚ÄòWhere someone seeks to reduce their tax liability through the use of tax avoidance schemes, HMRC
would be very keen to make sure that any scheme met both the letter, and the spirit, of the tax law. To that end, the government has made an additional £900 million available to HMRC to ensure the tax rules are respected across the board.’

Citigroup and Allen & Overy both declined to comment, and Barclays was unavailable for comment.

Note what these other advisers are saying. They are saying there is a spirit to tax law, and that they recognise it, and that they are, in this extreme circumstance, trying to comply with it even though, as they note, the scheme is technically legal. What is more, they are advising their clients to comply with it.

In other words, they are saying that tax avoidance may be legal, but unacceptable.

Some of us have, of course been saying this for a long time but it’s good to see that bankers agree. Barclays excepted, of course, or so it seems.

Barclays, tax havens and how to describe it

Banking, Barclays, Cayman, Country-by-country, Secrecy jurisdictions, Tax Havens, TUC 13 Responses »

Jan 122011

Bob Diamond was before the Treasury Select Committee yesterday. Chuka Umunna, MP fr Streatham, was one of those questioning him. And as the Daily Mail notes, he tabled some new evidence on the use of tax havens / secrecy jurisdictions by Barclays:

I admit I spoke to Chuka’s office about this before the event, suggesting how they might find this data from the annual return forms of the bank.

It’s not the first time I’ve offered that advice to someone interested in banks and tax havens. The TUC did something similar in 2009. I note they say I did the research, which was kind of them but a little unfair because as I recall it was actually done by Markus Meinzer and all I did was review it and explain why banks were required to disclose this information. As Chuka’s team showed, it’s not a hard exercise.

But it is revealing. First, it shows Diamond does not know the structure of the bank of which he is CEO. As the Mail notes:

Diamond was reduced to replying, ‘I don’t know’ to a series of questions about how many subsidiary firms the bank had in countries such as the Cayman Islands and Isle of Man.

What does that say about its governance?

Second, we get back as ever to the language of such structures. Again, as the Mail notes:

‘I can assure you Barclays is not evading taxes,’ Diamond said.

But Umunna pointed out that Diamond knew all too well that he was referring to ‘tax avoidance’, not illegal evasion. Diamond preferred to categorise it as ‘tax efficiency’.

So, we’re back to tax efficiency. I can do no better than quote the Tax Justice Network on this issue, with a few changes to suit the context:

Tax efficiency is a term we hear rather frequently from the tax avoiding community. It does not mean that there will be any improvement in manufacturing productivity. No energy will be saved. No new jobs created. The quality of products will not improve, in fact, in conventional economic terms there will be no efficiency gain whatsoever.

When tax lawyers and corporate spokespersons utter the term “tax efficiency” what they really mean is that corporate shareholders will pay less tax as a result of shifting profits to tax havens. The inevitable outcome of such “efficiency” gains is that British citizens will either face further public service cuts or higher household tax bills.

What this reveals is a major flaw in the current structure of globalisation. Companies and rich people can locate wherever they are “tax efficient”. Ordinary people lose out from the process. There is a term for this: its called the Bono Defence. Named after the Irish rock musician whose band shifted its tax base from now bankrupt Ireland to the Netherlands in the name of “tax efficiency”, the Bono Defence provides stark warning that tax dodging doesn’t promote better economics; it promotes failed states.

That’s the nub of it. Barclays is taking your money.

And Diamond then has the gall to say that the tax his staff pay is paid by Barclays. From the Mail, again:

The American banker was also unable to produce figures for the amount of corporate tax the Barclays pays in the UK. He boasted that it paid £2bn of tax last year, but admitted that this included payroll tax paid by employees.

Of course, if we had country-by-country reporting Barclays would have to report how much tax they really paid in the UK, and that’s why this is such a core demand for those wanting tax justice.

The evidence that Diamond heads a bank that is out of control – and about which he has remarkably little knowledge – seems compelling based on this performance. In that case maybe he too should understand the demand for country-by-country reporting – he might know a lot more about his own operations if the bank used it for its own reporting purposes.

Bad news for Africa – Barclays is coming

Banking, Barclays, Development, Secrecy jurisdictions, Tax Havens Comments Off

Nov 292010

From the FT this morning:

Barclays will place the booming African market firmly at the centre of its growth strategy over the coming years as it plans to shake-up a business that has so far failed to make the most of opportunities in the continent.

This is bad news for Africa.

Expect more tax haven abuse to follow. That’s the core of Barclays’ plan for the continent.