Why Wall Street Banks Don’t Need “Tax Inversions” by Reuters @FortuneMagazine December 23, 2015, 4:01 AM EST E-mail Tweet Facebook Linkedin Share icons Seven of the biggest Wall Street investment banks operating in London paid little or no tax in Britain last year, despite reporting billions of dollars in profits, analysis of corporate filings shows. In recent months, the seven investment and corporate banks operating in London reported figures showing they paid a combined $31 million (£21 million) in corporation tax in 2014. Between them the banks generated revenues of $31 billion in the UK, profits of $5.3 billion and employed 33,000 staff. Five of the banks – JP Morgan jpm , Bank of America Merrill Lynch bac , Deutsche Bank AG db , Nomura Holding nrscf and Morgan Stanley ms – said their main UK arms paid no corporation tax, as Britain calls corporate income tax. The filings show that the seven banks, which also include Goldman Sachs and UBS AG, used tax breaks and tax losses generated during the banking crisis to reduce their tax bills. The filings also show that at least some of the banks paid no tax because they reported losses in London, while reporting profits in much smaller affiliates in lower tax jurisdictions. The bank filings are available because of a 2013 change to European Union rules that requires banks to publish country-by-country profit and tax break-downs. The British government says it is leading international efforts to ensure corporations pay their fair share of tax, after public anger at reports in recent years that companies such as Google goog and Starbucks sbux were shifting profits out of Britain to avoid tax. MPs and tax campaigners said that after receiving so much support during the crisis, it was wrong that banks could operate almost tax-free. “The tax receipts from these large financial institutions show what a charade their claim to pay their fair share has become,” said John Mann, a lawmaker with the opposition Labour party. “They rely on the taxpayer to underwrite their risk, yet they pay a minimal return back to the exchequer.” Spokespeople for the banks all declined to comment although their filings noted that they followed all tax rules and noted that tax payments can be volatile and may reflect profits generated in earlier years. Banking industry groups say that in addition to paying corporation tax, the banks benefit the exchequer by generating significant amounts of income tax. The UK tax authority, Her Majesty’s Revenue and Customers (HMRC) and the finance ministry declined to comment on the banks’ payments, citing taxpayer confidentiality. HMRC said it applied the tax rules set by government without discretion. JP Morgan was the most profitable investment and commercial bank in the UK, which has published full data for 2014. Its main UK investment banking arm, J.P. Morgan Securities Plc, had $2.6 billion in profits last year. It paid no tax, the bank said in its country-by-country report (CBCR) – which all major banks operating in the E.U. are required to produce by the end of 2015. The bank noted in its filing that it had a 2014 UK tax liability of $524 million but that this was offset by foreign tax credits, overpayments in previous periods and “the benefit of other available tax reliefs”. A spokesman declined to provide additional details. Goldman Sachs Group UK Ltd, that group’s main UK unit, said it made $2 billion in Britain in 2014 and paid $26.6 million in corporation tax. The group’s CBCR said the low tax bill partly reflected “timing differences” around payment of stock awards to staff. Stock awards are often expensed against reported profits before the shares are paid out and the issuing company can take a tax deduction, which can add to the volatility of tax payments. The U.K., like the United States, offers companies more generous tax treatment of stock awards than some other countries, such as Germany, which gives no tax deductions to companies who issue shares to staff, said Patrick Sinewe, partner at German tax law firm Sinewe & Kollegen. Bank of America Merrill Lynch eliminated the tax bill on $550 million in profits by “the utilization of historical losses brought forward” its filings said. BoA Merrill Lynch has around $8 billion in tax assets which it can use to reduce its U.K. tax bill, courtesy of over more than $34 billion in U.K. losses generated in 2007 and 2008. Switzerland’s UBS AG also reduced its U.K. tax bill thanks to historic losses. The reduction in tax revenues in this way prompted the UK to restrict the use of historic tax losses earlier this year. From the 2015-16 current tax year, banks will only be allowed to offset such losses against half their profits. Some countries such as Switzerland are even more restrictive, putting time limits of five years or less on the use of losses. Some banks’ small U.K. tax payments are because they report modest profits here. Deutsche Bank’s European investment banking arm is based in London and the vast majority of its European fees are generated here, filings show, but its profits are not. Deutsche reported a loss of 2.2 billion euros ($2.4 billion) in 2014 in Britain, where it employs 8,000 investment and commercial bankers. By contrast, it reported €549 million profit in Luxembourg, where it employed 610 people and where tax rules allow financial companies to earn income tax free. The absence of U.K. profits meant Deutsche had no tax bill in Britain. A spokesman declined to say how much tax the bank paid in Luxembourg or why its Luxembourg operation was so profitable and the much bigger U.K. operation reported a loss. U.S. banking giant Morgan Stanley also reported a loss in Britain in 2014, giving rise to a zero tax bill. This is despite the fact that half of Morgan Stanley’s non-U.S. revenues, which generated profits of $1.8 billion in 2014, come from the London arm, filings show. Profits at the main U.K. operating unit were eliminated by $670 million in inter-group charges. A Morgan Stanley spokesman declined to say what jurisdiction the affiliates to which these charges were paid were based in, and to offer any comment on its tax affairs. Sharon Bowles, a U.K. member of the European Parliament was one of those who pushed for country-by-country reporting in her role as chair of the European Parliament’s Economic and Monetary Affairs Committee. She said it was important to know just how much tax banks paid. “The U.K. may have been more tolerant with banks than other countries might be and more than the public might be happy with,” Bowles said. “This is why we passed this measure, so people would do this kind of analysis.” Banking groups lobbied hard against the E.U. requirement to publish country-by-country reports, citing the cost of preparing statements and the potential for the data to be misinterpreted by the public. “There is a risk of potential confusion for users rather than a potential to enhance transparency,” the European Banking Federation said in a letter to the European Commission in January 2013.