A CALL for banks to clean up their act has been made following the revelation that 20 of Europe’s biggest establishments posted profits of at least £18 billion in global tax havens last year.

New EU transparency rules also show that five UK banks reported combined profits of £9bn in global tax havens, 67 per cent of their overall profits. A total of £522 million of that sum was made in six UK-linked tax havens. The UK banks – HSBC, Barclays, RBS, Lloyds and Standard Chartered – paid just seven per cent tax on their profits in UK-linked tax havens, compared with the UK corporate tax rate of 20 per cent.

Research by Oxfam and Fair Finance Guide International shows that although all 20 European banks reported a quarter of their global profits in tax havens, they registered only 12 per cent of their global turnover and seven per cent of their global employees in those countries.

The Opening the Vaults report states that subsidiaries in tax havens are, on average, twice as lucrative as those elsewhere and that in 2015 European banks posted at least £456m in profits from tax havens where they have no employees at all.

Luxembourg and Ireland are the banks’ most favoured countries, accounting for almost a third of their profits posted in tax havens in 2015.

Oxfam claims the disproportionately large profits that banks register in tax havens may indicate that some banks are taking advantage of low-tax rates to sidestep legal requirements or avoid paying their fair share of tax in other countries and to facilitate tax dodging for clients.

The charity’s report was only possible because of new EU transparency rules requiring European banks to publish a country-by-country breakdown of their profits and tax payments to assess their use of tax havens.

“It’s a national embarrassment that the UK’s crown dependencies and overseas territories continue to act as tax havens and facilitate tax dodging that deprives other countries of money needed to fight poverty,” said Sally Copley, Oxfam’s head of UK Policy and Campaigns.

“The Prime Minister should ensure that UK-linked tax havens overturn harmful secrecy rules and introduce public registers of who owns companies incorporated there.

“Transparency is a crucial first step towards ending corporate tax dodging,” she added. “A glimpse into banks’ tax affairs shows we need them to clean up their act. It’s only fair that businesses open their books to scrutiny so that we can see whether they are paying their fair share towards public services in both rich and poor countries.

“The UK has shown leadership by championing better transparency rules for businesses – now the Government needs to say when it will introduce these in Britain, regardless of what EU states decide.”

Last year 300 leading economists warned in a joint letter to world leaders that tax havens serve no useful economic purpose.

The UN estimates that tax dodging by multinational companies deprives poor countries of at least £80bn in much-needed revenue every year. The money could pay to educate the 124 million children currently not in school and fund healthcare to save the lives of six million children.

While the UK Government has already given the Treasury the power to expand the public country-by-country reporting rules from banks to other big businesses, it is yet to do so and is waiting to see what the EU does.