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Saturday 16th August 2008
While news that US banking giant Merrill Lynch has lost £16 billion on the value of its so called toxic investments would normally be of major concern, there seems to be a silver lining for the investment giant. These losses are all UK based (i.e. attributed to the UK division of the investment giant) and set to be offset against future UK profits meaning that the group will pay no UK corporation tax for the foreseeable future!
This is yet another example of how the credit crunch will leave a lasting mark on the UK economy with corporation tax receipts set to plummet over the next few years as the banking sector makes use of substantial losses incurred in the UK. Treasury figures show that the UK banking sector attributed £7 billion in corporation tax in 2005-06, the largest sector of any in the UK economy.
Even though the size of the Merrill Lynch losses are huge and unlikely to be rivalled by any other UK operation, the amalgamation of all UK banking losses over the last year will also be substantial. It seems that even when the economy picks up it will take a long time to unravel the after affects of the credit crunch and return tax receipts to more traditional levels. |
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