Anorak News | Dear God, even the Telegraph Can’t understand Corporate Tax

Dear God, even the Telegraph Can’t understand Corporate Tax

by | 2nd, January 2012

DO newspapers understand tax? No. We sorta expect this sort of thing from the Guardian or the Mirror. Not just whipping up people into paroxysms of rage about companies not paying their tax but not actually understanding what’s going on in the first place.

Now we appear to have the Telegraph again, not just whipping people up, but actually not understanding what in buggery’s going on at all.

Barclays stockpiles ‘losses’ to soften tax obligations
Barclays has amassed a war chest of “losses” to offset against future tax payments that can almost rival those at the crippled state-backed banks, despite remaining strongly profitable.

Yep, if you make a loss you can carry that loss forward to when you make a profit and set it off against that profit. Obviously.

Because we tax companies on their accumulated profits. As we should do of course.

They are usually created when a company makes a loss and can be held for several years to offset against future profits. However, while RBS and Lloyds made enormous losses in the crisis, Barclays always declared a profit at group level.

Last year, Barclays generated an extra £591m in “tax losses carried forward” despite making £6bn of profits before tax. The tax gain suggests the bank made £2bn of losses, which the bank said “mainly relates to entities in the USA, the UK and Spain”.

Yes, excellent. Barclays operates in what? 50 countries? 90? In some of them it made a profit in others a loss. And it pays taxes on profits in each country that it makes profits. Or saves losses in each of those countries for when it might makes profits in the future.

The results also revealed that the bank reduced its corporate tax bill by £365m in 2010 to £1.52bn by using deferred tax assets – £205m of which arose “from the reorganisation of Spanish securitisation financing”.

So, in some places where it had made a loss in the past it then made a profit last year. Which it offset against its previous losses. There’s really nothing very difficult nor nefarious about all of this you know?

Earlier this year, chief executive Bob Diamond was forced to reveal that the bank operated nearly 300 subsidiaries in tax havens and had paid just £113m of corporation tax in the UK in 2009 – a year in which it handed out £3.4bn in bonuses.

Yup. Bonuses are a cost of doing business so they come off your revenues before you calculate your profits and then the tax you have to pay on your profits.

And, let’s not forget, Barclays pays taxes in all of the countries where it makes a profit. So, lots of the corporation tax that Barclays did pay that year would not have been paid in the UK. And no, you don’t (normally) pay more tax in the UK when you’ve already paid tax elsewhere. And finally, corporation tax paid in 2009 is on profits made in 2008, because you have to wait until the end of the year to work our what your profits are so that you can calculate the tax.

And what happened in 2007/2008? Yup, that’s right, we had a financial crisis didn’t we? With banks losing or at least not making very much money. So the £113 million doesn’t even refer to the same year as the £3.4 billion.

As I say, we expect this sort of silliness from the likes of The Guardian (or Chuka Umunna) because they’re trying to make a political point and the truth be damned. And ignorant enough to not know what the truth is anyway.

But dang, you’d expect the Telegraph to get things like this right wouldn’t you?

Posted: 2nd, January 2012 | In: Key Posts, Money Comment | TrackBack | Permalink