Liberal Democrat peer will table questions to ask how HMRC could provide more information on adherence to code
The Liberal Democrat peer Lord Oakeshott intends to demand more information from the government on how banks comply with the tax code they signed last year following revelations that Barclays paid just �113m in corporation tax in 2009.
The former Treasury spokesman for the Lib Dems in the Lords said he would table questions to ask how HM Revenue & Customs (HMRC) could provide more information about whether banks were adhering to the code ? first devised by Labour ? which demands banks comply with both the "spirit and the letter" of the law.
Oakeshott, who resigned as the Lib Dems' spokesman in protest at the Project Merlin agreement with banks over bonuses and lending, said more detail was needed on Barclays' compliance with the code: "HMRC must be more transparent on how we know if they've complied with the code. They can't go on hiding behind the cloak of taxpayer confidentiality when a vast taxpayer-guaranteed bank has signed such a public commitment."
Barclays said that in signing the government's code on tax it was aware of its responsibilities as a "corporate citizen".
"We have signed up to the UK government's code of practice on taxation, which is very clear on the obligations it places on banks to ensure they manage their tax affairs properly."
The bank signed up last year after George Osborne implemented the tax code, designed by Labour to ensure the City was not depriving the exchequer of tax revenue by avoiding tax or devising schemes to allow its customers to avoid tax.
In the year in which the bank paid �113m of corporation tax, it reported pre-tax profits of �11.6bn, but it argued that making a direct comparison between the amount it paid in corporation tax and its headline profits was inappropriate because of the complex nature of its business, which includes hundreds of subsidiaries and operations in 50 countries.
The bank has 30 subsidiary companies in the Isle of Man, 38 in Jersey and 181 in the Cayman Islands and said they were subject to UK taxes.
"All foreign subsidiaries have been included in returns to HMRC either because they are UK tax resident and file UK tax returns or because they are listed on returns giving information on income earned that may be subject to UK tax under what is referred to as the controlled foreign company (CFC) legislation," the bank's chief executive, Bob Diamond, said in a submission to the Treasury select committee that was released late Friday.
The CFC rules are intended to ensure that companies pay taxes in the UK on their foreign companies.
Barclays paid �2bn of taxes to HMRC in 2009 and said the �113m it paid in corporation tax had been affected by the losses it had incurred from write-downs caused by the credit crunch. In 2008, as the banking crisis gripped the markets, Barclays took gross credit market losses and bad debt provisions of �8bn.
Tax experts pointed out that Barclays was not alone in enjoying the benefit of losses incurred during the crisis. Bailed-out Royal Bank of Scotland (RBS) paid no corporation tax in 2009 and in the third quarter of 2010, the most recent update from the Edinburgh-based bank, it admitted it had �5.9bn of tax credits, some �3.7bn of which related to the UK.
This means the bank will not need to pay corporation tax for some time, even when it returns to profit. RBS is forecast to make a loss of �700m for 2010 when it reports next week, but it will still make payroll taxes to the exchequer on behalf of its staff.
John Whiting, tax policy director at the Chartered Institute of Taxation, said that a bank's tax bill would be affected by a number of factors. "One of the factors is where these profits were earned. They may have been made overseas," Whiting said.
The �113m of corporation tax dates back to 2009. For 2010, Barclays said it had paid �2.8bn in taxes in the UK, some �1.3bn of which was "on behalf of staff". Globally its tax bill was �6.1bn, which also includes a vast payment of employee taxes.
In the same period, the average pay for staff inside its Barclays Capital investment banking arm rose to �236,000, as bonuses deferred from previous years bolstered reduced bonuses in 2010. Whiting said the exchequer was the "winner" on bonuses as recipients paid out two-thirds of their awards in income tax and national insurance contributions.
Source: http://www.guardian.co.uk/business/2011/feb/18/lord-oakeshott-transparency-banks-tax
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