Bob Diamond, the chief executive of Barclays, has side-stepped a request to commit to reducing the number of subsidiary companies Barclays operates in tax havens to demonstrate it will abide by the spirit of the government’s code of tax practice.
During Diamond’s evidence session at the Treasury select committee (TSC) yesterday, Labour MP and TSC member Chuka Umunna said Barclays has over 300 companies incorporated in tax havens and was engaged in tax avoidance on a “grand scale”.
Diamond said: “I am happy to look at the numbers you gave. I did not have them and it would not be appropriate for me to agree to something that I am not sure of the facts of.”
The code of practice on tax for banks aims to encourage banks to follow the spirit and the letter of tax law and not to undertake tax planning to achieve tax results contrary to the intentions of parliament.
The code’s guidance notes say: “The question of whether tax results are contrary to the intentions of parliament can be answered by asking whether tax consequences of a proposed transaction are too good to be true.” (article continues below)
Barclays has signed up to the code and Diamond says the company complies with the spirit and the letter of the law.
Umunna said according to Barclays Plc annual return, the company has 30 companies incorporated in the Isle of Mann, 38 in Jersey and 181 in the Cayman Islands.
Umunna said: “A cursory reading of your group returns show you have over 300 companies operating in tax haven jurisdictions around the world.”
He suggested Barclays, through its structured capital markets division, uses those companies to enable the avoidance of paying UK tax.
He said: “That division runs tax arbitrage for your bank, for high net worth individuals for companies, which enable you to all avoid the payment of UK tax.”
Diamond said: “It is our obligation when we do financing for clients to do it in the most tax efficient way and that is in line with government policy.”
Umunna said: “Your efficiency may be our avoidance.”
Speaking to Money Marketing, Fund Strategy’s sister publication, after the session, TSC member and Conservative MP Mark Garnier said Umunna was raising an important point, but there is an upside for consumers which is sometimes overlooked.
He says: “People do not like tax avoidance, but if they realised what it meant in terms of getting cheaper services, you probably would concede when push comes to shove they need to be tax efficient to work as hard as they can for customers and shareholders.”