Some of the biggest foreign investment and commercial banks operating in Britain paid an average tax rate of just 6% on the billions of dollars of profits they made in the country last year, a Reuters analysis of regulatory filings shows.
That is less than a third of Britain’s corporate rate of 20%. There is, however, nothing illegal about how they managed to reduce their taxes, and includes using losses built up during the financial crisis to offset current bills.
Seven of the biggest international banks operating in London - Europe’s main investment banking centre - have published profit and tax data ahead of a year-end deadline stipulated by EU law.
Five of them, all US banks, reported a profit - a combined $7.5bn - and paid corporation tax, or corporate income tax, of $452m. Bank of America’s two main UK investment banking subsidiaries paid no corporation tax on combined profits of $875m. JPMorgan paid $160m in tax on $3.3bn in UK profits.
Goldman Sachs paid $256m tax on $2.8bn profit, while Morgan Stanley’s main UK unit paid $33m tax and earned $530m.
All the banks declined to comment on the data except San Francisco-based Wells Fargo, which reported $2.7m tax on $34m profit. It said its objective was to comply with all of its tax compliance requirements.
The British Bankers’ Association (BBA) said the data did not reflect the sector’s full contribution and that, including other taxes and payments, foreign banks contributed about $20bn to the UK treasury last year.
The British tax authority, Her Majesty’s Revenue and Customs (HMC), said the Government had taken steps to ensure banks paid the correct amount of tax.
“Many complex factors contribute to the effective rate of tax paid by corporate businesses,” a spokesman said.
The 6% rate is still higher than the average rate of 1% paid for 2014 by the 10 biggest foreign investment and commercial banks that reported UK profits and taxes.
Last year the UK government changed tax rules so that such losses made during the crisis may only offset half a bank’s income in any one year.
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