‘Stupid bankers’ under fire for tax avoidance

Financial regulators are starting to turn the screws on the big banks that have complex tax avoidance schemes in place to protect their profits and those of their corporate clients.

Financial Services Authority inspectors who regularly visit the banks are collecting tax data and information about tax avoidance schemes for clients.

The move follows Chancellor Alistair Darling’s criticism at the Brighton Labour Party conference this week of ‘stupid bankers’ taking the UK financial system to the brink of collapse and then bringing around the begging bowl for a £1.4 trillion bail out.

The FSA announced in July that plans were in the pipeline to penalise banks for giving tax avoidance advice. Part of this review is demanding proof from banks that they are adhering to tax laws.

Failure to comply was highlighted by a recent BBC TV Panorama programme that secretly filmed offshore advisors of UK banks giving misleading tax advise that might be considered as tax evasion by investing money through Hong Kong.

This inquiry is likely to end up costing the banks more in tax, said FSA chairman Adair Turner.

The financial collapse has revealed the internal workings of banks to financial regulators and the public as many of their processes are more transparent because government representatives now sit on their boards of directors.

This public investment has lifted the veil of secrecy that banks traditionally impose on their inner workings and customers can now see that huge profits are made at their expense often without justification - like extending margins on mortgage lending, revealing tax avoidance schemes and risky dealings.

Mean while, the Bank of England and FSA are still considering whether to penalise banks for keeping too much of their bail-out money in their vaults in stead of easing credit for homeowners and businesses that is contributing to the UK’s recovery from recession.

HM revenue and Customs is about to join the anti-banker party by drafting a voluntary code of tax conduct and ethics the banks need to adhere to - and if they don’t sign up, HMRC is threatening more tax investigations.

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