Britannia Radio

For all the high flown language here this is fraud on a mega scale.   
They say they’ve now stopped but even that’s not certain.

Since these state controlled banks are stuffed full of dodgy  
characters doing dodgier deals Redwood’s call to split them up and  
close large parts of them down,  seems more urgent than ever.  [see  
“Positive thinking” earlier ]

xxxxxxxxxxxxxxxxx cs
[The Mail also had this story though this seems to be the original]
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THE GUARDIAN            13.3.09
RBS avoided £500m of tax in global deals
State-supported bank admits billions were put into schemes to cut tax  
bill
    •    Felicity Lawrence and David Leigh
    
Royal Bank of Scotland tied up at least £25bn in complex  
international tax-avoidance schemes during its boom years, costing  
the British and US treasuries more than £500m in lost revenue, the  
Guardian can disclose.
It is the first time that a major bank has admitted the existence of  
such deals on this scale. The new management at RBS, mindful of the  
fact that it is now 70% owned by the taxpayer, has disbanded the  
department responsible and will put an end to the controversial  
practice.

"The idea that we could take support from the Treasury with one hand  
and somehow pick their pocket with the other would be wrong on every  
level. We have always sought to avoid this sort of stance and that's  
more important now than ever. It's not a sustainable way to do  
business," said an RBS source. [And it never was, chum! -cs]

The previous management, led by Sir Fred Goodwin - who is now retired  
with a £700,000-a-year pension - presided over a massive expansion of  
so-called "structured trades". These are huge deals across national  
borders, to make profit out of tax avoidance. They are not illegal,  
but secretively exploit gaps in different countries' tax laws.

The Guardian has identified at least 13 such deals, many using the  
offshore facilities of the Cayman Islands, in the Caribbean, in  
ingenious ways.

The deals involved "investments" of as much as £6bn at a time. The  
cash was moved in circles between RBS and other banks. One former  
British official close to the US revenue's intelligence efforts said  
tax deals such as this were an important factor in driving the  
"securitisation" boom which led to the worldwide financial calamity.

Banks enthusiastically bought huge tranches of so-called mortgage- 
backed securities as part of tax deals.

The British official said: "Mega tax-avoidance schemes demanded the  
movement of mega funds. The web of notes passing between banks to  
effect avoidance schemes was so big and complex that no-one knew  
quite what they had.
"The profit is actually only a tax relief and the underlying reality  
of many of these deals was a loss."

The new management of RBS has promised that such activities will now  
stop. This is partly because the enormous sums of capital required  
have dried up, and partly because the bank recognises it is now  
dependent on taxpayer support.

An RBS spokesman told the Guardian: "We have always sought to  
maintain an open, constructive and transparent relationship with [HM  
Revenue and Customs] as befits an institution of our size and  
importance to the UK economy and exchequer.
"This is even more important now given the level of UK taxpayer  
support for our business as we restructure."

The team behind RBS's "structured trades" has been largely disbanded.  
Johnny Cameron, who headed its stricken Global Markets operation, has  
departed, with a pension of £62,000 a year. [There’s hardship for  
you! -cs]

Tim Pettit, global head of the financial structuring group, whose  
name was on many of these structured trades, has now moved to another  
position within RBS.

But industry sources say the government has so far failed to make  
giving up tax avoidance a general condition of providing taxpayers  
money to help bail out Britain's banks.

Lloyds, despite accepting toxic asset insurance that will take the  
state's share of the bank to 77%, would not respond when asked if it  
will promise to abandon similar trades, which have totalled £4bn.  
Lloyds is currently fighting the UK government in court over a tax- 
avoidance scheme.

According to insiders, Barclays Bank has been the biggest structured  
finance tax avoider, regarded as "high-risk" by HMRC. Barclays has  
sought so far to survive without government intervention.

The US treasury appears to have been the tax loser in many of these  
RBS deals. President Barack Obama has already personally vowed to  
crack down on the British-controlled Cayman Islands in the present  
international campaign against tax havens.

Jack Blum, a Washington lawyer who is a frequent expert witness to  
Senate tax investigations, said: "We've seen several cases of US  
banks working with UK banks to make a profit from tax avoidance for  
both of them. It's very hard to ferret out unless someone confesses."

The essence of many of the RBS deals is so-called "double-dipping".  
Tax losses end up in secretive offshore entities with ambiguous or  
dual corporate status, and then both RBS and a foreign partner claim  
tax reliefs from the same deal.

The foreign counterparties in the RBS deals include some of the  
biggest names in international finance - the troubled US insurer AIG,  
the now part-nationalised Dutch-Belgian bankers Fortis, insurers  
Swiss Re, and the US investment banks Morgan Stanley, Merrill Lynch,  
and Goldman Sachs.
A number of the transactions had been halted over the past five years  
by changes in either UK or US tax law. But Treasury sources told the  
Guardian that although HM Revenue and Customs were aware of the RBS  
deals, they were only in the early stages of studying them.

More recent deals appear to have become more creative [What does  
‘creative’ mean ?  Dodgier still? -cs]  in response to crackdowns.