Britain wants banks to come clean on taxes

LONDON, March 16 (Reuters) - Britain wants banks to follow a code of practice aimed at making them more open about their tax liabilities, finance minister Alistair Darling said on Monday.

Darling’s remarks came amid public concern that banks that are rely on taxpayers’ money to keep them afloat are trying to avoid paying their dues to government.

The Sunday Times reported at the weekend that Barclays BARC.L, which is in talks with the government to insure itself against losses from toxic assets, avoids nearly 1 billion pounds of tax annually with the help of complex financial instruments.

Barclays said the claim was “absolute nonsense”.

“We expect banks to fully comply with their tax obligations,” Darling told parliament.

He said he had asked tax authorities to publish a draft code of practice on taxation for the banking sector “so that banks will comply not just with the letter but the spirit of the law.”

The code would be published in time for the Budget on April 22 and introduced as soon as possible.

The code is expected to be voluntary at first and is being targeted at banks because the complex financial schemes they use to limit their tax liabilities can have a knock-on effect on financial stability as they are hard for regulators to inspect.

The British government has taken majority stakes in Royal Bank of Scotland RBS.L and Lloyds Banking Group LLOY.L following bailouts costing billions of pounds.

“It is important to have a code of conduct, partly because of the very complexity of banking and the way in which banks and others sought to develop instruments to avoid taxes has in itself posed a systemic threat to the system,” Darling said. “The public expect that if we support the banking system the banks abide by that code.” (Editing by David Cowell)