Monday, February 21, 2011
Barclays paid 1% in apples of tax on its pears of profits
Another day, another spurious tax statistic enters common parlance. I have heard three separate references today to the 'fact' that Barclays paid "only one per cent in corporation tax on its 2009 profits of £11.6 billion". The People, for example, are fanning the flames here.
According to the Guardian, the 1% rate was first disclosed by Chief Executive Bob Diamond in a letter sent to Labour MP Chuka Umunna. This seems unlikely as the letter was less than clear as it referenced all of the tax paid by Barclays, including PAYE and NIC deducted from staff salaries.
I am indebted to Christie Malry, who has explained on the FCAblog, five reasons why the 1% tax rate is a misnomer. It involves comparing apples and pears. Most obvious is the fact that corporation tax paid in 2009 does not relate to the profits earned in 2009. It largely relates to the profits of 2008. And the profits figure of £11.6b is a worldwide figure so of course UK corporation tax will not come to anything close to 28% of that sum. Only profits arising in the UK are subject to tax here.
Barclays 2009 accounts by the way show (PBT) profits of £4.5b and a tax charge of just over £1b - a rate of 23.4% NOT 1%. Not even close. Mind you I have yet to trace the origin of the figure of £113m corporation tax being quoted by the press.
Oh - and lest anyone should forget, profits made in 2008 (and 2009) were subject to tax in accordance with the tax regime put in place by the last Labour Government.