Barclay Bank got away with eluding nearly £2 Billion in Arrangement with Luxembourg
Another incident of banks getting away with breaking the law? No way!
Another incident of banks getting away with breaking the law? No way! Barclays is lined up on the gallows as it has been discovered they’ve eluded nearly £2 Billion in taxes due to an arrangement in Luxembourg allowing them to pay less than 1% on profits for more than a decade.
The Guardian has done an analysis on the Barclays tax bills and is reporting it is still benefiting from the controversial decision in 2009. Barclay has booked profits from a $15.2 Billion sale fund management business in Luxembourg rather than in the U.K. where it is headquartered.
Booking the profits overseas means that the bank was able to take advantage of offsetting future profits against a drop in the value of company shares it acquired as part of the deal. Due to this arrangement, Barclays earned billions of pounds at the expense of nearly no taxes.
“These revelations that Barclays is using a scheme in an infamous tax haven leaves the British-headquartered bank with important questions to answer. Why is Barclays setting up shop in Luxembourg at all, other than to avoid tax? Does this artificial financial arrangement mean that profits are shifted away from the UK, thus harming our tax coffers? Or have business investments been channeled through this tax haven instead of in Britain, harming our economy in the process?”
Margaret Hodge, the Senior Labor MP, said.
Luxembourg is the bank’s third most profitable area with a turnover of £1.1 Billion last year alone. The Luxembourg branch only employs 54 individuals which allow the bank to turn nearly all of the income into profit. Keep in mind, that they employ nearly 46,000 individuals in the U.K. and roughly 10,000 in the United States.
According to the annual tax documents released by the bank, it has only paid £46 Million in taxes on a combined profit of £6.6 Billion since 2013. If the bank had not done this, they would be taxed nearly 30%. Reuters first revealed the tax arrangement in 2016, but the extent of the benefits was not known.
“We paid no corporation tax in Luxembourg in 2021 as our taxable profits were offset by substantial tax losses brought forward from prior years, and also due to dividend income not being taxable under Luxembourg law. We have unused tax losses which are automatically carried forward, and available to offset against future taxable profits.”
A 2021 report from Barclay stated.
“The structure of the BGI sale was not aimed at securing a tax reduction but intended to secure a simpler and more certain tax treatment and avoid volatility in the bank’s regulatory capital.”
Barclays said in a statement.
The winding down of the unit resulted in a drop in local profits in subsequent years, falling as low as £318 Million in 2018. At the time, the bank was reporting nearly £1.4 Billion, or about £100 Million for each of the 14 people employed there
Barclays, however, announced the fresh investment in 2019, helping profits rebound to more than £1.1 Billion by 2020. It involved expanding services for its multinational clients, despite its staff base only increasing to just over 50 employees.
Today the bank offers a range of services out of Luxembourg, which it said was focused on serving local clients and offering cash management, debt, foreign exchange, and trade finance.
Read an in-depth story HERE