A new code of conduct for banks to stop them avoiding billions of pounds in taxes is to be introduced, Alistair Darling announced yesterday.
The Chancellor will publish proposals with his Budget on 22 April for a voluntary code to ensure the banks obey "the spirit and letter of the law" on taxation. If they do not comply, he will enshrine the code in law. It is claimed that the state-controlled Royal Bank of Scotland tied up £25bn in tax-avoidance schemes while it was expanding, costing the British and US taxpayers more than £500m in lost revenue.
RBS has 238 offshore companies and the Lloyds Banking Group, in which the Government also has a majority stake, has more than than 125. The two banks have insisted they do comply with the law. The code will apply to all banks, including those in the private-sector.
Unlike tax evasion, tax avoidance is not illegal, but HM Revenue & Customs has clawed back billions by closing tax loopholes exploited by advisers acting for companies and individuals. Mr Darling now wants to extend the crackdown to banks. "We expect banks to fully comply with their tax obligations," he said.
The Government may face criticism for not opting for a statutory code but Treasury sources insisted that the voluntary approach would be tightened if it did not work.
Vince Cable, the Liberal Democrats' Treasury spokesman, welcomed the proposal but said the Government should immediately stop the banks in which it has a stake from avoiding taxes. He said: "The Government has had 12 years to identify problems in this area, especially as many of the tax havens are in British-dependent territories, so why hasn't it moved earlier?"
Mr Darling made his announcement when he reported to MPs on the weekend meeting of the G20 finance ministers.
George Osborne, the shadow Chancellor, said the leaders' summit in London on 2 April may fall short of the "grand bargain" sought by Gordon Brown, but Mr Darling played down differences between the US and Europe over further fiscal stimulus measures: "We agreed that we should be ready to do more, not all countries in the same way or at the same time, but whatever is needed."
Mr Brown acknowledged for the first time yesterday that he should have pressed for tougher financial regulation a decade ago but did not apologise for the Government's role in the banking crisis, the nature of which was global, he said, not national. He told The Guardian he took "full responsibility" for his actions.
"Perhaps 10 years ago, after the Asian crisis when other countries thought these problems would go away, we should have been tougher... keeping and forcing these issues on to the agenda like we did on debt relief and other issues of international policy," he said.
He also called for a new global free trade deal to revive the economy and said Britain would contribute £200m to a fund to help the world's poorest people.Reuse content