Opposition politicians and tax campaigners have expressed outrage after it emerged that some of the biggest and most profitable investment banks in the City of London paid little or no corporation tax last year.
The Guardian reports that Seven City banks paid a combined £21m in corporation tax in 2014, according to research by Reuters on Tuesday. Between them the banks, together employing about 33,000 mainly City workers, generated UK profits of £3.6bn on revenues of £21bn in the UK.
Five of the banks – JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Nomura and Morgan Stanley – disclosed their main UK arms paid no corporation tax, according to Reuters. Goldman Sachs UK Ltd revealed UK tax of $26.6m on UK profits of $1.98bn. UBS also recorded low UK tax.
Tax disclosures were released in country-by-country filings required of investment banking companies. They detail staff numbers, turnover, profits and tax paid by key trading subsidiaries in each country where they are active. The figures lay bare how firms shift income from high- to low- tax jurisdictions.
Labour MP, John Mann, said: “The tax receipts from these large financial institutions show what a charade their claim to pay their fair share has become. They rely on the taxpayer to underwrite their risk, yet they pay a minimal return back to the exchequer.”
Barry Johnston, ActionAid campaign director, said: “The disclosure that UK banks are paying tiny amounts of tax will fuel public anger at a tax system perceived as being hugely unfair. These shocking revelations lay bare the huge flaws in the global tax system which allow multinationals to slash their tax bills by shifting numbers around on a spreadsheet.”
Low tax bills for banks are in large part a legacy of huge losses reported in the years since the banking crash of 2008. Those losses created an unprecedented stockpile of tax credits, which banks have been using to offset against taxable income as they have moved back into profit.
Last year, chancellor George Osborne admitted the situation meant “some banks wouldn’t be paying tax for 15 or 20 years” – which he described as “totally unacceptable”. From the current 2015-16 tax year, he said bank tax losses would only be available to offset against half of taxable profits.
Analysis by Reuters found at least some of the banks paid no tax because they reported losses in London, while reporting profits in much smaller affiliates in lower tax jurisdictions.
The bank filings are available because of a 2013 change to European Union rules that requires banks to publish country-by-country profit and tax breakdowns.