UK banks must come clean on tax haven activities says TUC

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date: 27 January 2009

embargo: 00:01 hours Thursday 29 January 2009

The TUC is today (Thursday) calling on the Government to make the banks in which it has shares or who are receiving assistance from the Bank of England fully reveal their tax haven activities.

This follows a TUC analysis of company reports and returns which shows that the big banks have numerous subsidiaries in tax havens and that one, in an apparent breach of company law, has not revealed its subsidiaries.

The TUC research uses the same definition of tax havens as a study carried out for the US Senate by the US Government Accountability Office (GAO) http://www.gao.gov/products/GAO-09-157

It shows that Lloyds TSB, RBS, HSBC and Barclays have between them well over a thousand subsidiary companies (1,207) incorporated in tax havens. The most popular location is the notorious tax haven of the Cayman Islands with 262 companies, Jersey is second, with 170 companies. HBOS is not included as it has not published a list of its subsidiary companies for 2006, 2007 or 2008 in either its annual report or its Companies House return, in apparent breach of company law.

Not every subsidiary located in a tax haven or financial secrecy jurisdiction will necessarily be used for tax avoidance, says the TUC analysis. Some may be simply providing banking services to the local population and business community of countries such as Ireland - or have particular commercial links to countries such as HSBC's ties to Hong Kong.

TUC General Secretary Brendan Barber said: 'The taxpayer is now propping up Britain's banks, either directly or indirectly. Even those who have not had direct bail-outs now trade with an implicit guarantee from the Government. The irresponsible behaviour of banks here and abroad is the biggest cause of the recession.

'Yet even those who come cap in hand to the taxpayer and Bank of England, continue to do business in tax havens. This raises questions about whether part of the objective is avoiding paying a fair rate of tax to the UK - a tax gap that has to be made up by the rest of us.

'We cannot know the extent of these activities. Indeed one of the main attractions of tax havens is their secrecy. There is no suggestion that anyone has broken any tax laws, but now banks have public stakes or trade with the knowledge that the taxpayer stands ready to bail them out, the taxpayer has a right to know the full extent of bank activities and liabilities across the world.

'We should know where banks undertake their activities, where they record their profits and where they pay their taxes. Country-by-country reporting of their activities is essential if we, the UK taxpayers, are to know the risk we are under-writing.

'Voters are increasingly angry at the banks, who they rightly think must take a large share of the blame for the jobs and homes that will be lost in this recession. The Government should set up a tough public inquiry into why our financial system came so close to collapse - and it should investigate the full extent of their tax avoidance.'

The TUC research

The research was carried out for the TUC by tax expert Richard Murphy. The full table is available at http://www.tuc.org.uk/extras/banktaxhaven.pdf

The following data was secured for 2008 (unless noted):

  • Annual return form for Lloyds TSB Group plc
  • Annual return form for the Royal Bank of Scotland Group plc
  • Annual return form for HBOS plc for 2006, 2007 and 2008
  • Annual return form for Barclays plc
  • Annual return form for HSBC Holdings plc and information revealed subsequently
  • Accounts to 31 December 2007 for HBOS plc.

A company with subsidiaries was required under the Companies Act 1985 and is still required under the Companies Act 2006 to disclose the names of all subsidiaries, their place of incorporation and information on the proportion of their capital held directly or indirectly by the parent company. If this is not disclosed in the accounts of the parent company because the list is too long then the it can instead be attached to the next annual return form filed with the Registrar of Companies.

Lloyds TSB, RBS and Barclays filed the lists in 2008 with their annual returns.

HSBC filed a list but apparently contrary to legal requirements failed to say where its subsidiaries were incorporated. HSBC has now made this available.

HBOS has not filed a list in 2006, 2007 or 2008. Its accounts to 2007 only name 17 subsidiary companies. Those same accounts acknowledge that the list is not complete. Other subsidiaries should have been filed with the annual return form.

The data for RBS, Lloyds TSB and Barclays has been analysed in full. That for HSBC was supplied by them to the Observer newspaper who provided it to the TUC and it has been analysed from that source.

There is no agreed international definition of tax havens and financial privacy jurisdictions. This study uses the same list as that used by the US GAO study. Not every subsidiary will necessarily be involved in tax avoidance or has been set up to take advantage of secrecy provisions. Particularly in those countries with sizeable populations such as Ireland there is also clearly much legitimate banking business.

The four groups analysed comprised 5,400 companies in all of which 1,207 were in tax havens as defined in the GAO report (22.4 per cent). In addition 53 companies were incorporated in the Netherlands, which is normally considered a tax haven but has been excluded from this study for the sake of consistency with the GAO report.

HSBC had the largest number of tax haven subsidiaries (529 - 26.3 per cent of its group companies). Barclays had the largest concentration of tax haven subsidiaries in one place, 143 in Cayman. These can only be required for the purposes of financial structuring of transactions, probably to secure a tax advantage.

Cayman was the most popular tax haven (262 companies in all), the top ten were:

Cayman Islands

262

Jersey

170

Hong Kong

141

Ireland

119

Guernsey

68

Bahamas

63

British Virgin Islands

51

Luxembourg

49

Isle of Man

46

Bermuda

32

RBS had 238 subsidiary companies in tax havens, 15.3 per cent of its group. HSBC had 529 companies (26.3 per cent). Barclays had 315 companies (29.6 per cent). Lloyds TSB had 125 tax haven subsidiaries, using Jersey most commonly, having 60 subsidiaries there.

Similar work recently published by the US Senate has shown no bank there had more tax haven subsidiaries than HSBC, and that on average UK banks have many more tax haven subsidiaries than their US counterparts, most of whom had significantly less than 100.

Lloyds, Barclays, HSBC and RBS all have subsidiaries in the notorious Liechtenstein tax haven.

NOTES TO EDITORS:

The US study is available at http://www.gao.gov/products/GAO-09-157

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

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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 Brenchley T: 020 7467 1337 M: 07900 910624 E: ebrenchley@tuc.org.uk

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