Friday, February 18, 2011

Barclays, correlations and tax

"Any link between Barclays Group profits and the amount of tax paid to the UK government is inappropriate - there is no direct correlation between the two."

Barclays Bank Press release

I defy anyone to find a more arrogant statement than the one produced by Barclays bank and reported in yesterday's Guardian. Whatever Barclays might claim, the vast majority of its operations are based here in the UK. Nevertheless, it somehow they contrived to pay only one percent of its annual profits to the UK Exchequer.

Some simple arithmetic highlights the absurdity of the Barclay's statement. The current rate of corporate income tax is 28 percent. Therefore, in order to pay just one percent of global profits as taxes to the UK, it follows that only 3.6 percent of those profits are attributable to UK banking sector operations. Does that seem likely? Call me a failed accountant, but I think not.

In terms of financing its operations, Barclays is proudly British. It has profited handsomely from the low rates engineered by the Bank of England. While savers are being punished by zero returns on their deposits, Barclays bank generously awarded their staff with a huge pay increase last year. However, the patriotism disappears when it comes to paying tax.

The bank also has the reassurance of knowing that should they fall into any difficulties, the taxpayer is there ready to bail it out. Yet despite this extraordinary generous financial back-stopping by the state, Barclays claims that there is no correlation between its profitability and the amount of tax it pays to the government.

Imagine if we all thought that way. Suppose that millions of PAYE taxpayers suddenly claimed that their salaries have no correlation whatsoever with the amount of tax owed to the government. It is of course an absurd claim.

Bankers are out of control. This sense of entitlement knows no bounds. They think it's perfectly acceptable to demand massive bailouts when their reckless decisions threaten bankruptcy. They also feel no obligation to pay a reasonable contribution to the public purse. Instead, they claim their corporate affairs are too complex to require paying any tax.

Earlier this week, David Cameron promised welfare reform. He pointed to a sense of entitlement that is endemic among the poorer sections of society. I'm still waiting for a similar statement about corporate welfare. When will we see a banking sector corporate welfare reform bill before parliament?

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