LONDON Two more investment banks have reported paying zero tax in Britain in 2014, prompting the opposition Labour party to urge the government to reverse a tax change it made for banks last year.
Citigroup and Credit Suisse disclosed in the past fortnight that their main UK subsidiaries paid no corporate income tax in 2014, the most recent year for which figures are available. This means seven of the 10 biggest foreign investment and commercial banks operating in Europe's main investment banking center have said their main British arms paid no tax in that year.
In total the 10 banking groups generated over $40 billion in fees in Britain in 2014, reported $6.5 billion in profit and employed almost 50,000 people. But they contributed just $205 million in corporate income tax.
"These are damning findings that make a real mockery of the government’s approach to taxation of the financial sector,” said John McDonnell MP, the opposition Labour party’s shadow finance minister.
The other five banks, as reported by Reuters last month, are JP Morgan Chase & Co., Nomura Holdings Inc, Deutsche Bank AG, Bank of America Merrill Lynch and Morgan Stanley. All declined to comment. There is no evidence that they broke any tax rules.
Most companies engage in tax planning to manage their bills, and banking lobby groups say corporate income tax is just one of many taxes the investment banks pay - Britain benefits richly from income taxes on bankers’ bonuses.
“The government believes it is crucial that the banks make a fair contribution to restoring stability to the public finances and has taken important steps to ensure they do this,” a spokesman for the finance ministry said. The tax authority said it ensures that all businesses pay tax due under British law, but declined to comment on the banks.
In July, following pressure from banks which threatened to move operations from London, Finance Minister George Osborne said he would halve a levy banks must pay as a percentage of their assets, and he would restrict the base on which it is calculated.
At the same time he increased the tax rate banks must pay on corporate income, to 8 percentage points above the standard rate.
Tax experts say corporation tax is easier to avoid than the bank levy.
McDonnell said the figures showed Osborne was already pursuing a “soft touch” approach. "This report should be setting off alarm bells at the Treasury and he should be reversing his decision on the bank levy immediately,” he said.
Tax avoidance has become a hot political topic in Britain after revelations in recent years of profit shifting by big groups including Apple Inc. and Amazon.com. Last year, banks were required to disclose how much tax they have paid on profits generated country-by-country. On Dec. 31, Citigroup said that its two main UK subsidiaries had a combined profit of $308 million, but losses from the past reduced the tax it actually had to pay to zero.
Credit Suisse did not have a tax bill because it reported a loss in Britain for 2014. The bank reports most of its European profits in Switzerland, where effective tax rates can be much lower than in Britain.
Of the 10 biggest foreign investment banks measured by fee income, only three paid corporate income tax in 2014. Goldman Sachs Group Inc paid $27 million in tax on $2 billion of profit generated by its London arm, while Switzerland’s UBS Group AG paid $4 million on $140 million in UK profits. Both declined to comment.
The biggest taxpayer of the 10 was Paris-based BNP Paribas, which paid $174 million on $954 million profit generated by its UK unit, which focuses on investment and commercial banking.
"BNP Paribas is determined to do its civic duty in the field of taxation,” the bank said in a statement.
It is not possible to compare the contributions of British banks including Barclays and HSBC, because even though they have large investment banking businesses, their country-by-country reports also include taxes paid on retail operations. Barclays declined to comment and no-one from HSBC was available.
(Edited by Sara Ledwith)
Our top photos from the last 24 hours.