Writedowns reported in recent weeks by the Royal Bank of Scotland, HBOS and Lloyds TSB are estimated to cut more than £2.5bn off the three banks’ combined tax bills, most of which is expected to come at the expense of British taxpayers.
Based on estimates compiled by the Financial Times, the figure represents more than 5% of the HM Treasury’s forecast for corporation tax receipts in the 2007-08 financial year and highlights the dependence of the public finances on the banking industry, which has accounted for a growing share of the tax base in recent years.
In 2005-06, the most recent year for which a breakdown is available, the banking, finance and insurance sectors paid corporation tax of £11.6bn – about a quarter of the total.
The damage suffered by UK banks from market turmoil will be highlighted this week when two of Britain’s biggest banks, HSBC and Barclays, deliver their first quarter results and Barclays as expected announces writedowns of £1.4bn before tax.
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