An interesting blog on the tax contributions written by Geoff and J. Gay Meeks made by the banking industry. It follows in the wake of corruption in the banking industry after the massive bailouts (e.g. with regard to libor rate fixing and the mis-selling of financial products)
Amongst other things, the authors report:
HMRC data show that Corporation Tax receipts from the banks in current prices have declined from £7.0 billion in 2005-6 to just £1.3 billion in 2011-12, £2.3 billion in 2012-13 and £1.6 billion in 2013-14. As a materiality check, this decline in annual receipts from the banks (about £5 billion) is roughly equivalent to total annual expenditure on unemployment benefits.
…although the Chancellor has reduced the Corporation Tax rate over this period, simulations show that, because of offsetting factors, this contributes little to the explanation of the fall in receipts
…the fall is not because of a collapse in these banks’ global operating profits, which were actually marginally higher in the three years 2010-12, after the bailout, than in 2005-7, in the boom before the crisis.
…part of the explanation lies in the allowance made for banks to reduce their tax bill by setting against tax the losses on loans which have been “impaired” – where the banks don’t expect to recover them in full. The impairments of the six banks rose from £38bn in 2005-07 to £89 billion in 2010-12.
This latter point is really interesting given that part of this level of ‘impairment’ reported by the six banks could be seen as assistance to the banks for the bad loans THEY made. It is thus another element of hidden corporate welfare that hasn’t been included in previous assessments of the size of the bailout.
The link to the blog is here: The curious case of bank tax since the bailout | British Politics and Policy at LSE