From someone wibbling in a guest blog at Ritchie’s:
Ignoring for a moment Barclays role in the recent LIBOR scandal and its impact on public finances, the real public procurement issue appears when we explore Barclays corporation tax profile, and the implications of tax avoidance on public sector finances.
Local government is reliant upon central government grants for its survival, so you might think that Barclays paying a shockingly low 1% effective tax rate on £11.6bn UK profit in 2010 may be cause for alarm within public procurement circles. You would be wrong.
Justin Thompson, Director of Social Inclusion, Knowsley Metropolitan Borough Council said that: “if you can’t measure it, from a procurement perspective, it doesn’t exist.”
Justin is correct. Through my procurement research, I knew council banking procurement is completely silent on tax avoidance and the use of tax havens. As councils do not measure corporate tax avoidance within procurement, they effectively pretend it does not exist.
As the session was opened up to questions from the floor, I asked Nick Starkey how we could take social value commissioning seriously, whilst public procurement frameworks continue to ignore the glaring issue of corporate tax avoidance by firms like Barclays, which robs councils including Oldham of the taxes required to fund basic services including schools?
Starkey’s response was that he would need to take the issue up with HMRC.
With brutal 34% austerity cuts to council funding since the 2008 banking crisis and 2010 budgetary review, anger at the banks runs deep within local government.
A motion for a UK Robin Hood Tax on financial transactions has now been passed by 46 UK local authorities, where the proceeds of the Robin Hood Tax would fund struggling public services impacted by austerity cuts stemming from the banking crisis.
In the past fortnight, a new campaign known as the ‘Fair Tax Mark’ has launched to attempt to reframe the tax debate, by promoting the payment of fair taxes as a badge of honour, and point of differentiation vs tax avoiding competitors.
There is no industry where a Fair Tax Mark is more urgently needed than the UK banking and financial services sector, where corporate tax avoidance is not only the modus operandi for the banks themselves, but a highly profitable consulting business.
I well recall that Barclay’s tax bill.
The reason that the bill was low was because Chuka Umunna (yes, it was he) was comparing the UK corporation tax bill against global profits. And there were a few adjustments that needed to be made. For example, Barclay’s made a vast profit (some 50% of all of them) by selling off a subsidiary. On which they gained the substantial shareholding exemption (SSE, the same thing used by The Guardian more recently). Something specifically brought in by Gordon Brown so this was within both the letter and the spirit of the law. There were also tax losses from previous years to bring forward: again, entirely spirit and letter of law stuff. Further, there were taxes paid to other governments abroad where Barclays had made profits abroad.
All leading to Barclays having a small liability of UK corporation tax. And the thing is none of this was about evasion, avoidance, tax abuse or anything else. It was the straight and strict application of both the spirit and letter of tax law.
Which leads to an interesting conclusion. That Barclay’s tax bill would almost certainly pass the Fair Tax Mark. Yet it is that very bill itself that is being used as the justification for why there should be a
shakedown operation Fair Tax Mark in hte first place.