Banks dodge £80bn tax bill
They won't pay Treasury a penny for years
GREEDY banks are exploiting a tax loophole to dodge paying the government £80BILLION over the next 15 years.
The News of the World can reveal how even banks who were BAILED OUT with billions of taxpayers' cash are taking advantage of the ruse.
Banks only pay tax on profits and do not have to shell out if they have made a loss.
But they can also set heavy losses against FUTURE tax payments - which means they may be able to avoid paying tax for decades because of just one bad year.
Foreign banks are the biggest winners under the scam. US giant Merrill Lynch was saved from collapse after being taken over by the Bank of America, which was propped up by the US government and posted losses of £600m on Friday.
Losses
Merrill Lynch themselves recorded a UK operating loss of £29bn this year. The bank is now off-setting that loss against future profits, which will save it a cool £8bn.
In 2006, before the Credit Crunch, the company paid £80m in Corporation Tax (28p from every £1 in profits). However, even if it gets back to that level of profits, it will not now have to pay the British Treasury any tax until 2060.
Three bailed-out British banks, Lloyds TSB, Royal Bank of Scotland and HBOS, have revealed debts of £10bn. This could enable them to write £2.5bn off their tax bills over the next three years.
Only RBS has agreed not to offset its losses against future tax bills.
But foreign banks such as Merrill Lynch which have received help in their own countries do not need to stick to the three-year limit. The tax rules were written when banks were making massive profits and were designed to tempt foreign banks to run risky but profitable operations through London.
A Treasury source confirmed the scam could cost the government as much as £80bn over the next decade.
He said: "Yes, you're right to say that this will benefit banks for years to come.
"The trouble is that the system was designed when it was unthinkable that banks would make such staggering losses.
"We have tried to limit the damage with our own bailed out banks but cannot do anything about foreign banks which have not received state aid here."
Last night Shadow Chancellor George Osborne, who uncovered the tax loophole, said: "We're all in this together - and that includes the banks.
Escape
"Struggling British families would find it grossly unfair if the banks avoided paying their fair share to help fix Labour's debt crisis.
"We Conservatives won't let them escape their responsibilities."
John McFall, chairman of the powerful House of Commons Treasury Select Committee, described the tax loophole as a "missed opportunity" for the British economy.
He stormed: "At a time when tax revenue incomes for the government have fallen through the floor, this should not happen.
"It should be an opportunity to ensure the taxpayer gets something back for the gigantic multi-billion-pound bailout that propped these banks up last year."
Fat cats fill their boots with £5bn in bonuses
By Sophy Ridge
BRITAIN'S banking fat cats will pocket a whopping £5BILLION in bonus payments this year, as the City returns to business as usual.
The eye-watering payouts will be a kick in the teeth to cash-strapped taxpayers, who have stumped up billions to prop up the banks.
The City's total bonus pool is expected to rise by 38 per cent - up from £3.6bn in 2008 - according to top think-tank the Centre for Economics and Business Research (CEBR).
And individual payouts will rise even quicker because the bonus pool is being shared by fewer people after sweeping redundancies in the City.
CEBR economist Benjamin Williamson said: "We expect the total bonus pay out to be between £4.5 and £5 billion. A lot of players have left the market so firms can charge customers higher fees and make bigger profits. As a result workers are being rewarded with bigger bonuses."
Lib Dem Treasury spokesman Vince Cable said: "It's farcical that so soon after the reckless greed of bankers brought the world economy to its knees we are seeing a return to business as usual.
"Bankers should spare a thought for taxpayers who bailed them out, some of whom no longer have jobs."
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This article has 9 comments
I really can't believe what I read here, please people wake up, the world will not end if banks colapse, we need to understand that this obvious inequality of rich and poor is deliberatly being exploited by the rich and well off, what they hope to get away with is that you will be to afraid to say or do anything about the unfairness all around you and carry on getting richer while you struggle to keep your head above water, in my opinion stop being afraid and start to being non compliant and very vocal about this ridiculous situation of obvious inequality. It is of course a very complex issue as there are many factors including media and other influences, but the basic solution remains the same, we need fair play and equality.
By Jim Leishman.. Posted March 22 2010 at 10:02 PM.
There wont be riots in the streets becuase no one will want to damage the cars that they havent finished paying of on HP or the houses that they bought on mortgages 6x their salary. Trust me and if you dont believe me you can watch the news on the TV you bought over four years interest free credit whilst sitting on the sofas that you dont make repayments on until Jan next year.
Bankers, its all their fault.
By Anthony.. Posted October 18 2009 at 10:33 PM.
Thanks inverclyde22!
Got it now!
Though if banks closed I'd switch wage to post office account. Bills I mostly pay at post office anyway as hate direct debits. Or by my bank card.
They (Govt) should have been stricter and tied up loopholes before bailed banks out. As Brian Morris (first commenter) said, there'll be riots in streets over this if not careful. Though way this country is going down - be riots soon anyway!
By Gillian.. Posted October 18 2009 at 12:32 PM.
Gavin obviously hasn'y visited the City recently. If he had he would know it's hard to find an old Etonian there nowadays.
By Simon Marshland.. Posted October 18 2009 at 11:35 AM.
The tories will do nothing about this after all its all there friends form eton in the city .
By gavin.. Posted October 18 2009 at 9:52 AM.
If the banks had failed then the whole economic system would have gone too.
Can you imagine of your bank didn't exist - where would your wages/benefits have been paid to, how would you have paid your bills. Larger companies would have failed because they could not collect their monies.
We could have been back to 're-inventing the wheel'.
By inverclyde22.. Posted October 18 2009 at 9:13 AM.
Why did they have to bail out the banks anyway? Would it have been catrastrophic to do that? Can someone message the potential consequences of not bailing them out?
(Pardon my ignorance on this - when comes to politics and finance I don't pay much attention).
By Gillian.. Posted October 18 2009 at 7:59 AM.
Labour the party of bad legislation. Why is my tax bill rising year on year when Labour waste so much of my money?
By steve tea.. Posted October 18 2009 at 7:38 AM.
If this tax avoidance is allowed to take happen - I predict that there will be riots in the street in the UK - the Banks have always been thieves in normal times - with the cohort Brown the Clown giving our money away to them as if it was his to give away - I would not like to predict the reaction/outcome of this one
By Brian Morris.. Posted October 18 2009 at 3:02 AM.