LONDON: The 20 biggest European banks posted profits of at least £18bn in global tax havens last year, according to a report by Oxfam. Meanwhile, the UK banks included in the report – HSBC, Barclays, RBS, Lloyds and Standard Chartered – reported combined profits of £9bn in global tax havens, equivalent to 67% of their profits. Oxfam found that £522m of the £9bn was made in six UK-linked tax havens, where they paid just 7% tax on their profits, compared to the UK corporate tax rate of 20%. The six UK tax havens were Bermuda, the British Virgin Islands, the Cayman Islands, and the Crown Dependencies (Guernsey, the Isle of Man and Jersey).
The top 20 EU banks meanwhile made €4.9bn (£4.2bn) in profits in Luxembourg, more than they made in the UK, Sweden and Germany combined. Oxfam argued that banks often do not pay any tax on profits booked in tax havens and claimed that European banks did not pay a single euro in tax on €383m in profits made in tax havens in 2015. Furthermore, some of these banks registered losses in countries where they operate. Deutsche Bank, for example, registered a loss in Germany while booking profits of €1.897m in tax havens.
A large proportion of these profits were made despite the banks not employing a single person in the countries concerned. At least €628m of the European banks’ profits were made in countries where they employ nobody. The charitable organisation said the report was only possible because of the new EU transparency rules, where banks are required to publish a country-by-country breakdown of their profits and tax payments. Sally Copley, Oxfam’s head of UK policy and campaigns said, “Transparency is a crucial first step towards ending corporate tax dodging. A glimpse into banks’ tax affairs shows we need them to clean up their act. It’s only fair that businesses open their books to scrutiny so that we can see whether they are paying their fair share towards public services in both rich and poor countries.
“The UK has shown leadership by championing better transparency rules for businesses – now the government needs to say when it will introduce these in Britain, regardless of what EU states decide.” Meanwhile, Luxembourg and Ireland were named banks’ most favoured tax havens, accounting for almost a third of their profits posted in tax havens in 2015. Copley said it was “a national embarrassment” that the UK’s crown dependencies and overseas territories “continue to act as tax havens and facilitate tax dodging that deprives other countries of money needed to fight poverty”. She urged Theresa May to ensure that UK-linked tax havens overturn harmful secrecy rules and introduce public registers of who owns companies incorporated there. This is because Oxfam believes that some banks are taking advantage of low-tax rates to dodge legal requirements or avoid paying their fair share of tax in other countries.
Last month, Bermuda’s finance minister Bob Richards accused the UK of double standards amid efforts by MPs to enforce public registers of beneficial ownership in the UK’s tax havens in order to improve tax transparency. He accused the UK of being a “tax haven” itself highlighting non-dom laws, which allow foreign nationals to live in Britain without paying tax on overseas income. Another Oxfam report published last year found that the Treasury was losing an estimated £5bn a year to money held by wealthy British people in known tax havens such as the Cayman Islands and Bermuda.
