Posted by Ian at 9 18 PM on Saturday, October 17
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 dodge. 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.
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 dodge 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.
“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.”