TUC condemns banks' 'tidy tax cut'

Banks could soon be paying a lower tax rate than consumers and small businesses as a result of increased VAT next month and corporation tax changes, the TUC has claimed.

The union organisation said the 20% VAT rate, up from 17.5%, and 1% cut in corporation tax to 27% in April could mean shoppers paying a higher rate of tax than banks.

The TUC claimed that multinational companies in the UK could be paying as little as 19% corporation tax in 2011 because of various loopholes they were able to “exploit” to bring down their bills.

UK banks will be able to offset the forthcoming corporation tax rate cut against the government’s £2.5 billion bank levy and actually cut their tax bill next year, the report claimed.

TUC General Secretary Brendan Barber said: “Shoppers looking for bargains in the January sales will soon be paying more to clear the debts racked up by the banks when they plunged the UK into recession and asked for a multi-trillion pound bailout.

“People will not be happy to learn that banks have managed to earn themselves a tidy tax cut as a reward for their failure while the rest of us suffer from job losses, tax hikes and the wrecking of public services.

“It’s about time the government stops being in thrall to the banks and implements some serious reform. Otherwise banks will make the same mistakes again and everyone else will be forced to pay the price.

“Consumer spending and business growth are crucial to our economic recovery. The last things we need are mass job losses and VAT hikes that will stifle growth and spread misery throughout the country.”

The TUC urged the Government to take firmer action against the banks and to confirm that the VAT rise would only be a temporary measure.