WIREDGOV

Despite being rescued by taxpayers during the crash, UK banks will avoid paying £19 billion of tax on future profits by offsetting their losses during the financial crisis against their tax bills. This is equivalent to more than £1,100 for every family in the UK, a TUC report says today (Monday).

The TUC report - The Corporate Tax Gap - says that as well as benefitting from an £850 billion bailout from taxpayers and the Bank of England during the recession, banks are able to offset their £19 billion of tax losses between 2007 and 2009 against paying tax on future profits.

The report, authored by tax specialist Richard Murphy, has calculated this double subsidy from the accounts of five UK high street banks - HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS (later Lloyds Banking Group) - and HM Revenue & Customs (HMRC) data.

The Corporate Tax Gap warns that banks could soon be paying a lower rate of tax than small businesses. The corporate tax gap - the difference between the rate of tax set by the Government and the actual rate companies pay - has grown by an average of 0.5 per cent a year over the last decade. Between 2000 and 2009, the effective corporation tax rate fell from 28 per cent to 21 per cent, much deeper than the headline rate cut from 30 per cent to 28 per cent, says the report.

With the Government planning to reduce corporation tax to 24 per cent, the UK's largest companies, including banks, will soon be paying an effective tax rate of 17 per cent - three per cent lower than small businesses, who are less able to exploit loopholes and therefore pay a headline rate of 20 per cent. As a result, the UK will soon have a regressive corporation tax regime, says the report.

The TUC has calculated that the banks' £19 billion double subsidy could pay for the following cuts between now and 2015:

• switching the indexation of benefits from RPI to CPI (£5.84 billion);
• housing benefit (£1.77 billion);
• tax credits (£3.22 billion);
• child benefit for higher rate taxpayers (£3 billion);
• estimated cuts to the science research budget (£3 billion); and,
• estimated cuts in HMRC resources to tackle tax avoidance (£2.1 billion).

TUC General Secretary Brendan Barber said: 'Banks caused the global financial crash and triggered the recession that produced the deficit. Yet not only did they 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.

'The Government's bank levy is small change compared to this huge loss as the business-as-usual bonus levels show.

'It's double bubble for the banks, but huge cuts, job losses and VAT increases for ordinary families.

'Small firms have every right to be angry too. Not only are they finding it hard to get credit from the banks, soon they will be paying more tax on their profits than the banks and other big companies.'

NOTES TO EDITORS:

- The Corporate Tax Gap is available to download under embargo at www.tuc.org.uk/extras/corporatetaxgap.pdf

- In December 2009 the National Audit Office estimated that the cost of public support given to the banks during the financial crisis was £850 billion http://bit.ly/7OMtKZ

- The estimated savings on indexation, tax credits and housing benefit are taken from the Emergency Budget www.hm-treasury.gov.uk/d/junebudget_complete.pdf

- At the Conservative conference, the Chancellor announced plans to scrap child benefit for higher rate taxpayers and estimated this would save £1 billion a year.

- Cutting the Government's £3.5 billion science budget by 25 per cent would save approximately £1 billion a year.

- Cutting the HMRC's £7.5 billion enforcement budget by 25 per cent would save £3 billion. However the Government recently announced plans to make £900 million available to tackle tax avoidance www.hm-treasury.gov.uk/press_46_10.htm

- The Office for National Statistics Focus on Families report estimates there are 17.1 million families in the UK www.statistics.gov.uk/focuson/families

- The TUC will be highlighting the banks' £19 billion double subsidy at a photo op outside the Treasury at 11.30am tomorrow (Tuesday) ahead of the anti-cuts rally on the eve of the Comprehensive Spending Review. Further info about the photo op and the rally is available from the TUC press office.

- All TUC press releases can be found at www.tuc.org.uk

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Elly Gibson T: 020 7467 1337 M: 07900 910624 E: egibson@tuc.org.uk