Leading European banks are booking around €20bn (£17bn) a year – equivalent to 14% of their total profits – in tax havens, with Barclays, HSBC and NatWest Group among those enjoying the lowest tax rates, according to an analysis, conducted by the EU Tax Observatory, of 36 big banks required to publicly report country-by-country data on their activities.
Banks said to enjoy a particularly low effective tax rate on their profits, of less than 15%, including Barclays, HSBC and NatWest.
The use of tax havens by banks is seen by many activists as particularly egregious since more than €1.5tn in taxpayer money was used to rescue ailing banks in Europe after the 2008 financial crisis.
Tax systems around the world have been increasingly left behind in recent years by the shifting of profits by large multinationals. Tax abuse by multinationals and avoidance by rich individuals is said by the Tax Justice Network campaign group to cost nations $427bn a year in lost revenues. The percentage of profits booked in tax havens has not changed over the last seven years despite hopes that country-by-country reporting introduced in 2014 would lead to a shift in practice.
The Organisation for Economic Co-operation and Development (OECD), 130 countries, representing more than 90% of global GDP, backed a global minimum tax rate on multinationals of 15% last July, after an initial attempt by US president Joe Biden to secure agreement on a 21% rate. Parallel measures to limit the shifting of profits into tax havens by the world’s 100 largest companies were proposed by Biden and are now under discussion at the OECD. The proposed treaty would give governments in the countries where multinationals have headquartered the right to apply a top-up levy to ensure the full global minimum rate is paid on all income.
However, reports suggest the list of 100 companies is likely to exclude banks after lobbying by the City of London and other international financial centres.
The research names 17 countries and territories as havens for the purposes of the study: Bahamas, Bermuda, the British Virgin Islands, Cayman Islands, Guernsey, Gibraltar, Hong Kong, Ireland, Isle of Man, Jersey, Kuwait, Luxembourg, Macao, Malta, Mauritius, Panama, and Qatar. Of those territories, the highest tax rate is found in Luxembourg (15%), while Bermuda, Panama, the British Virgin Islands and the Cayman Islands have a zero rate.