One of my commentators asked late last night:
I understood that November 3rd was the deadline for the major banks to sign-up to the code of conduct regarding their tax dealings. When Geo.Osborne appeared on the Andrew Marr Show a few weeks ago, just four had signed-up at that time. I’ve googled around, but can find no report on the final number of signatories. What’s happened? Do you know? Has the deadline been extended?
Excellent question.
I have no idea what the answer is.
And I can’t find anything about it either.
This was a major commitment Osborne was trumpeting in the Budget and CSR. So what is happening? have they signed, or not? And if not, what are the sanctions going to be?
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The original press reports were unclear about which banks were being asked to sign up to the code. They only said they were the “top 15 banks with business in the UK”.
That indicates that it would have included a sizeable number of non-UK banks with operations in London, some of them probably not even regulated in the UK. It is not surprising they are not rushing to sign up. Why would they?
Thank you your reply, Richard. The absence of any government press release would suggest little has happened, otherwise they’d be shouting the tax landmark from the rooftops. Osborne appears to have got himself into a corner. One of the banks that hadn’t signed up was Lloyds. However, on Wednesday (Nov 3rd) it was announced Osborne had approved the Lloyds board request for an £8million package for their new chief excecutive, presently a public sector position. Has he acceded to Lloyds board BEFORE obtaining their commitment to the Code of Conduct on tax?
He now HAS to achieve success on the Code of Conduct. If he doesn’t, he will lose all credibility politically and provide tangible evidence of executive inexperience.
Signatures are usually accompanied by dates. I’d be interested to see the signature dates on the salary package sign-off document and compare to the signature dates on the Code of Conduct, assuming it has/does get accepted. It may reveal Osborne has taken a huge, and unnecessary, gamble with tax revenue.
Addendum – I can feel a Freedom of Information request coming on!
Million Dollar Babe,
From the BBC webpage dated 18.10.10
“Lloyds Banking Group – which is 41%-owned by government – has yet to sign the government’s code of conduct on taxation, the BBC has learned.”
“Other banks which say they have so far failed to join the scheme include Barclays, Santander and HSBC.”
“All three have substantial operations in the UK – and have indirectly benefited from taxpayer support, said BBC business correspondent Joe Lynam.”
http://www.bbc.co.uk/news/business-11562832
@RichardSM
There is no hint of a doubt that Lloyds should sign up to the Code.
The same applies to HSBC and Barclays, although the argument is somewhat weaker.
The case of Santander UK is interesting. They don’t owe anything to the UK government, and overall they solved many more problems than they created. Without Santander, we (the UK taxpayer) would be carrying much more additional exposure on our books than we already are. Can the government really ask them to sign up to a Code that would prevent them from using every possible, entirely legal avenue to minimise their tax expense. Tough one, don’t you think?
Then there is the case of the global investment banks with operations in London. Their case is more straightforward. They never got a Dollar (or Pound) of UK government support, yet have just been hit with the bonus tax. US institutions alone contributed the majority of the bonus tax (see http://online.wsj.com/article/SB10001424052748703724104575379242848463392.html), and European banks made up much of the rest. Their boards are furious, and their shareholders are incandescent.
There is absolutely no chance, in the wake of the wake of the bonus tax, that any of these institutions will agree to waive their rights to use all available legal means to reduce their UK tax liabilities.
And if they did, they could probably be sued for criminal failure in their duty of care to their shareholders.
@Million Dollar Babe
Sorry, but you really are naive
You need a licence to operate a bank
No signature on the Code
No licence
No UK bank
Signatures will roll onto the paper faster than you could imagine – have not a moment’s hesitation
Simple really
@Richard Murphy
I am pretty certain that most if not all international banks do NOT have UK bank licenses.
All European banks operate as UK branches of EU/EEA branches under the passport system.
US banks typically only operate as broker dealers.
So the threat of suspending these firms’ banking license in the UK is unrealistic unless it is dealt with at en EU, or global level.
@Million Dollar Babe
If you are seriously saying there is no regulation that lets us cover this issue a) I’m sure you’re wrong and b) we need it
Either way, it’s possible
And remember – we’d be vastly better off with much less banking
Turner was right about it after all – it is very largely a socially useless activity
So if it goes – so what?
Million Dollar Babe
1) This article in The Telegraph, about new bank entrants, suggests that banks do require a licence before they can operate in UK.
“A number of UK institutions are known to be in the process of applying for licences, as are some overseas players. “I am aware of many client projects where we are helping them apply for banking licences,” one senior director from a leading firm of accountants says.”
“Several accounting firms are helping clients apply for licences but only Metro Bank, the brainchild of US entrepreneur Vernon Hill with ambitions for 400 branches, has broken cover and declared its intentions. It has been over a year since it first approached the FSA, and has yet to be cleared”
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6111158/Why-its-an-ideal-time-to-set-up-a-bank.html
2)The FSA maintains a list of banks incorporated in the UK. I clicked on the 30 Sept 2010 list. Looks like over one hundred banks are incorporated in the UK. There is a further list of banks incorporated outside the EEA but authorised to accept deposits through a branch in the UK.
http://www.fsa.gov.uk/Pages/Library/Other_publications/Banks/index.shtml
@RichardSM
Of course they are licensed – the pedants were picking up on a particular form of wording in which I used the vernacular rather than the precise form of wording
It makes them feel good
But it does not change the argument one iota
The fact is that no one can operate a bank or a banking style operation without being regulated – and the requirement I suggest could be included in that regulation