The ever-outspoken CEO of Barclays, Bob Diamond, has publicly accused the Treasury of abandoning taxpayer confidentiality because it identified his bank as a main culprit of a debt buyback scheme that avoided millions of pounds of tax. Diamond described the government’s decision to close the scheme in February as ‘completely unwarranted’.
Diamond wrote a letter to the chairman of the Treasury Select Committee, Andrew Tyrie, saying: ‘Unnecessary damage was placed [sic] on Barclay’s reputation just at a time when the focus should be rebuilding confidence and accelerating growth, not undermining it.’ We suspect Diamond’s outburst over the £500m dispute will not win him any sympathy with the public. The climate of banker bashing in recent years is unlikely to be receptive to yet more greedy-sounding news from the banking community…
Whatever your view of bankers however, Diamond has a point. The dispute relates to the bank having repurchased around £2.5bn of its own debt at a discount at the end of 2011. As a result of the discounted rate, Barclays made a profit, which was not taxable under the existing tax laws. Diamond claims that the bank flagged up the profits to HMRC, but the information was passed on to the Treasury, which then took action against Barclays with retroactive enforcement of new tax regulations.
The bank feels that the breach of taxpayer confidentiality undermines the purpose of a private tax system, and that the government is singling out Barclays to score political points and sate public anger at bankers’ role in the financial crisis.
On the other hand, tax legislation is always a game of cat and mouse, and when firms like Barclays think up new ways of avoiding tax, they can hardly be surprised if the authorities move to close the loophole. But even so, retroactive enforcement is probably a bit much.
Read MT’s exclusive interview with another of the UK’s most senior bankers, Peter Sands of Standard Chartered, here