Banks given two weeks to sign tax avoidance code | Business | The Guardian

Chancellor George Osborne wants to ensure banks are not depriving the exchequer of revenue. Photograph: Dan Kitwood/Getty Images

Barclays and HSBC are understood to be two of the major banks yet to formally sign a tax avoidance code that George Osborne said last night the government would use to ensure the City was not depriving the exchequer of billions of pounds of tax revenue.

Taxpayer-controlled Royal Bank of Scotland was the only bank to confirm that it had signed up to the code, designed by the Labour government after a series of articles in the Guardian highlighted the intricate but legal schemes used by banks to avoid paying tax.

As he announced his new crackdown yesterday, Osborne gave banks just a fortnight – until the start of November – to sign up to the code. The chancellor said just four banks out of 15 on his target list had signed up to the code, first published in June 2009. He did not identify the banks and the Treasury cited confidentially on tax affairs as its reason for not doing so.

Osborne attempted to demonstrate to the electorate that the banks – bailed out with up to £850bn of taxpayer support – were making a fair contribution to the economy at time when public sector jobs are being cut and benefit payments axed. "At the best of times tax evasion is unacceptable. At a time like this it is immoral," Osborne told BBC1's Andrew Marr Show.

It is understood that Barclays and HSBC are among a number of major institutions still reviewing the code, which is intended to both stop banks avoiding tax and designing schemes for their customers to avoid tax.

Both banks have international banking operations and last year Barclays took legal action against the Guardian to prevent publication of articles about its tax businesses. Barclays is understood to believe it is in compliance with the code but still considering its position while HSBC is understood to have indicated to the tax authorities that is inclined to sign up.

As well as scrutinising Barclays, the Guardian also revealed that RBS had tied up at least £25bn in complex international tax-avoidance schemes during its boom years, costing the British and US treasuries more than £500m in lost revenue. The management parachuted into RBS after its bailout by the taxpayer disbanded the department responsible.

While individual banks were reluctant to discuss whether they had signed up, their lobby group, the British Bankers' Association, said that its members "would continue to work with HM Revenue & Customs on issues relating to tax".

Osborne, who this week will set out new legislation for a levy on bank balance sheets, told the BBC: "We are going to be looking at the code of practice that the banks were supposed to sign up to to make them good taxpayers. I am going to be requiring by November that all the banks sign up to the thing that the last government said they were going to be signed up to and pay what is due."

It was not immediately clear what mechanism the Treasury would use to demand compliance or what the penalty would be if banks continued not to endorse the code.

"I completely understand people's anger on this. We have introduced a permanent bank levy and I will be publishing the legislation on that next week," he said.

Osborne's promise to bring in more tax revenue from the banks came as the TUC calculated that the UK banks would avoid paying £19bn of tax on future profits by offsetting their losses during the financial crisis against their tax bills. This is equivalent to £1,100 for every family in the UK.

The TUC report, by tax specialist Richard Murphy, also warns that banks could soon be paying a lower rate of tax than small businesses. While the government is cutting corporation tax to 24%, the report calculates that banks will pay 17% after exploiting loopholes, while small business will pay around 20%.

Brendan Barber, general secretary of the TUC, said: "Not only did banks take almost a trillion pounds from taxpayers to bail them out, they are now using the losses caused by their irresponsibility to cut their tax bills for years to come. Small firms have every right to be angry".

via guardian.co.uk