Taxes and banks

Changes in the way income generated overseas by the big banks is treated for tax purposes might strike you as shocking. As this article makes clear, it looks like the major banks will be able to get away with paying less in tax.

At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil PLC pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match the corporate tax rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

At a time when government has facilitated the recovery of the financial sector, one might have expected the fiscal contribution of the big banks to be maintained.