Ritchie on bank taxes

So let’s get back to the one tax the banks do pay as a charge on the income they make – which is corporation tax. As the Mail on Sunday notes today, based on research I did for them, the likelihood that any of our big banks will be paying any serious sums in corporation tax for a while to come is remote in the extreme. That’s because the 2009 accounts of each of the major banks shows just how much deferred tax asset they’re sitting on relating to tax losses that they can offset against their future profits – including those subject to Project Merlin. The figures are:

HSBC _ £4.2 billion

Barclays – £1 billion

Lloyds – £4 billion

RBS – £5.1 billion

Add them together and that’s more than £14.3 billion of tax that’s not going to be paid any time soon. Or at UK current corporate tax rates some £51 bn of profit that needs to be earned before tax is paid.

As the Mail article points out, that means it\’ll take two years before the banks exhaust these tax losses, given reported profits of about £25 billion a year.

But look at what he\’s arguing. When you make a profit you should pay tax. When you make a loss you should still pay tax on the profits you didn\’t make.

Next week, Ritchie reveals that not making a profit is corporation tax avoidance.

7 thoughts on “Ritchie on bank taxes”

  1. Next week, Ritchie reveals that not making a profit is corporation tax avoidance.

    I don’t know about “next week”, but isn’t Ritchie’s whole argument about big businesses and corporation taxes that they are by and large avoiding or reducing their real profits by declaring “Losses” (clearly artificial) and thereby avoiding corporation taxes which clearly should be at least 40% or better still 60% to reduce the taxes paid by the lower paid sectors of society.

    There is no way of avoiding this, Ritchie really and truly is one of Stalin’s “useful idiots”.


  2. As an accountant I presume the guy knows how to add up and to decide whether a purchase is an expense or an investment. Not sure what else he really knows.

    I still feel he ought to be parachuted into a real business. He’d last a week.

    Of course, however, he is right. Nobody is getting their hands on that non-existent cash soon. The banks will have to earn a profit first.

    From where he is to knowing about corporate fiscal policy??? Even when you are losing money and presuming you are a going concern, you continue to generate and pay tax (just not corporate income tax). The banks are, as always, vital for the present and future.

    Unfortunately for my little firm, we have large tax credits too. Bloody crisis has knocked us sideways. We took out personally guaranteed loans, shoved in more capital from our pockets, cut expenses, took pay cuts, shelved investment, innovated like mad, expanded our geographical reach using IT and we may survive. And you think the firm should pay income tax now or not recover from our losses. Give me the cash we needed and will need to survive, interest and guarantee free, and I will listen to you.

    Give me and my partners and the people who work here a bloody medal, more like.

    Or do you want to send me to jail for tax avoidance? This firm pays no corporate income tax this year, next year or probably the year after unless I turn into some kind of business genius.

    We continue to collect and pay VAT, the equivalent of NI and we have kept the majority of the people in their jobs. Not bad given the circumstances.

    And YES, we will write off the losses against future profits if (and when) we make them.

    Don’t let him near real policy makers, please. He firghtens the life out of me.

    Tim, make sure you report accurately as I have stopped going to his site. All I was doing was boosting his figures.

  3. It gets said that some banks shouldn’t have the benefit of these tax losses because those losses were bailed out by the government.

    But the bailout was a combination of loan, guarantee and equity – none of which counts as income.

    There will, and rightly, be a restriction on the losses if and to the extent that those losses are finally paid for by the government, through a loan being written off or a guarantee called on.

    But to say that losses should not be allowed because the business has borrowed money to fund those losses is absurd.

    I’m not sure if that is Murphy’s argument, but if it isn’t I can’t see what it is.

  4. And interesting that with Employer’s NI he accepts the principle of tax incidence – that the burden of a tax can fall on someone other than the person who pays it.

    So why does he deny it for corporation tax?

  5. Bilbao boy, I feel for you, I really do.

    The only consolation I can offer is that HMRC are rather more understanding of slipped PAYE payments than they used to be, and have really sped up R&D tax credit payments.

  6. Er…I thought both Barclays and HSBC survived without needing the UK government’s bailout monies? If that’s correct then Murphy’s already ridiculous argument becomes non-existent re those two banks.

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