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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2016/dec/08/tax-avoidance-banks-city-london-corporation
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| Heard the latest Christmas story? It’s about how UK banks pay all their taxes Heard the latest Christmas story? It’s about how UK banks pay all their taxes | |
| (about 5 hours later) | |
| A new report ostensibly lauding the tax contribution of UK banks and insurance companies should provide no festive reassurance. Issued by the City of London Corporation and PricewaterhouseCoopers (PwC) it claims that, against all the odds, the financial sector is making a heroic contribution to the UK public purse. Gosh, only if that were true. | A new report ostensibly lauding the tax contribution of UK banks and insurance companies should provide no festive reassurance. Issued by the City of London Corporation and PricewaterhouseCoopers (PwC) it claims that, against all the odds, the financial sector is making a heroic contribution to the UK public purse. Gosh, only if that were true. |
| From a sample of 50 financial services companies, including banks, building societies and insurance companies, it extrapolates that for the year to 31 March 2016 the financial sector made a contribution of £71.4bn to the public purse, or about 11.5% of the total UK tax receipts. Newspapers sympathetic to the finance industry have latched on to the headline figures, but the fine print of the report tells another story. | From a sample of 50 financial services companies, including banks, building societies and insurance companies, it extrapolates that for the year to 31 March 2016 the financial sector made a contribution of £71.4bn to the public purse, or about 11.5% of the total UK tax receipts. Newspapers sympathetic to the finance industry have latched on to the headline figures, but the fine print of the report tells another story. |
| The report says that it uses “the PwC Total Tax Contribution methodology, which looks at all the different taxes that companies pay and administer, including corporation tax, employment taxes, VAT, and other taxes”. In other words, the financial sector is claiming credit for taxes that are paid by its employees and customers. The £71.4bn figure includes £42.6bn relating to income tax and national insurance contributions (NIC) paid by employees under the pay as you earn (PAYE) system, and value added tax (VAT) and insurance premium tax collected from customers. | The report says that it uses “the PwC Total Tax Contribution methodology, which looks at all the different taxes that companies pay and administer, including corporation tax, employment taxes, VAT, and other taxes”. In other words, the financial sector is claiming credit for taxes that are paid by its employees and customers. The £71.4bn figure includes £42.6bn relating to income tax and national insurance contributions (NIC) paid by employees under the pay as you earn (PAYE) system, and value added tax (VAT) and insurance premium tax collected from customers. |
| These taxes are collected and paid over to Her Majesty’s Revenue and Customs (HMRC) by companies. The cost of collection is the normal part of doing business, but also yields substantial benefits to companies. Most of the taxes are paid in arrears to HMRC. For example, VAT settlement is generally made each quarter and PAYE amounts are paid to HMRC about three weeks after the event. The practical effect of this is that the financial sector enjoyed an interest-free loan of £42.6bn for a period of three weeks to three months, but the benefit of that is not mentioned in the report. | These taxes are collected and paid over to Her Majesty’s Revenue and Customs (HMRC) by companies. The cost of collection is the normal part of doing business, but also yields substantial benefits to companies. Most of the taxes are paid in arrears to HMRC. For example, VAT settlement is generally made each quarter and PAYE amounts are paid to HMRC about three weeks after the event. The practical effect of this is that the financial sector enjoyed an interest-free loan of £42.6bn for a period of three weeks to three months, but the benefit of that is not mentioned in the report. |
| The report claims that the financial sector paid the remainder, about £28.8bn (£71.4bn minus £42.6bn) in corporation tax, employers’ NIC and business rates. However, none of this can be verified from the audited accounts of companies as they provide very little information about the taxes paid in the UK or elsewhere. | The report claims that the financial sector paid the remainder, about £28.8bn (£71.4bn minus £42.6bn) in corporation tax, employers’ NIC and business rates. However, none of this can be verified from the audited accounts of companies as they provide very little information about the taxes paid in the UK or elsewhere. |
| A disclaimer buried in the fine print of the report says: “PwC has not verified, validated, or audited the data and cannot therefore give any undertaking as to the accuracy of the study results.” So the tax numbers are just estimated and can’t easily be corroborated. Actually, PwC could have lived up to its rhetoric of being an independent auditor and provided useful information, but fees get in the way. | A disclaimer buried in the fine print of the report says: “PwC has not verified, validated, or audited the data and cannot therefore give any undertaking as to the accuracy of the study results.” So the tax numbers are just estimated and can’t easily be corroborated. Actually, PwC could have lived up to its rhetoric of being an independent auditor and provided useful information, but fees get in the way. |
| PwC audits 103 of the FTSE 350 companies, including major banks and insurance companies, and is privy to information not available to outsiders. It collected £43m in audit and consultancy fees from Barclays Bank and £32.1m from Lloyds Banking Group and is fully aware of the tax strategies used by the finance industry. | PwC audits 103 of the FTSE 350 companies, including major banks and insurance companies, and is privy to information not available to outsiders. It collected £43m in audit and consultancy fees from Barclays Bank and £32.1m from Lloyds Banking Group and is fully aware of the tax strategies used by the finance industry. |
| It could have insisted that it would not put its name to a report containing unverifiable tax numbers, but has not done that. Financial services companies make numerous claims about social responsibility and have easily volunteered information about the taxes paid or avoided, but the report is not based on actual numbers. | It could have insisted that it would not put its name to a report containing unverifiable tax numbers, but has not done that. Financial services companies make numerous claims about social responsibility and have easily volunteered information about the taxes paid or avoided, but the report is not based on actual numbers. |
| The PwC report is notable for numerous omissions. It does not even contain an acknowledgement of the fact that the financial sector relies on support provided by taxpayers in the shape of loans and guarantees, or profits made through the private finance initiative (PFI). It is silent about the effective rate of corporation or capital gains taxes paid by financial services companies, profits shifted to tax havens, their tax avoidance schemes, or any sweetheart deals with HMRC. | The PwC report is notable for numerous omissions. It does not even contain an acknowledgement of the fact that the financial sector relies on support provided by taxpayers in the shape of loans and guarantees, or profits made through the private finance initiative (PFI). It is silent about the effective rate of corporation or capital gains taxes paid by financial services companies, profits shifted to tax havens, their tax avoidance schemes, or any sweetheart deals with HMRC. |
| PwC can hardly deny awareness of such matters, as numerous episodes have exposed its own complicity. For example, the UK House of Commons public accounts committee has accused the firm of promoting tax avoidance “on an industrial scale”. The LuxLeaks showed that PwC helped multinational companies secure at least 548 tax rulings in Luxembourg from 2002 to 2010 that may have enabled them to avoid taxes elsewhere. Some of its clients had an effective tax rates of less than 1% on the profits shifted to Luxembourg. | PwC can hardly deny awareness of such matters, as numerous episodes have exposed its own complicity. For example, the UK House of Commons public accounts committee has accused the firm of promoting tax avoidance “on an industrial scale”. The LuxLeaks showed that PwC helped multinational companies secure at least 548 tax rulings in Luxembourg from 2002 to 2010 that may have enabled them to avoid taxes elsewhere. Some of its clients had an effective tax rates of less than 1% on the profits shifted to Luxembourg. |
| The finance industry hasn’t turned into the new Santa Claus. What this report is all about is corporate propaganda and impression management. It is designed to deflect attention away from the routine involvement of major companies in organised tax avoidance. It is a shame that some news outlets have regurgitated the finance industry’s press releases rather than digging into the report and exposing its claims. | The finance industry hasn’t turned into the new Santa Claus. What this report is all about is corporate propaganda and impression management. It is designed to deflect attention away from the routine involvement of major companies in organised tax avoidance. It is a shame that some news outlets have regurgitated the finance industry’s press releases rather than digging into the report and exposing its claims. |