Barclays in frame for new offshore tax fraud allegations
The Financial Times is reporting that a Milan judge has said that Alessandro Profumo, the former head of Unicredit bank, is to stand trial along with 16 other Unicredit officials and three from Britain’s Barclays bank, for involvement in tax fraud. Barclays was the bank that helped Unicredit set up the scheme – and it has serious form in this respect (also see here and here and here and here, just for example). The FT explains the latest concisely:
“The case centres on the use of a Luxembourg-based offshore financial scheme set up by Barclays and used by UniCredit.”
The details are dizzying, but effectively involve the hocus-pocus transmutation of one form of income into a different form of income that attracts a lower tax rate, as Bloomberg explains:
“Brontos was created to make it appear that interest on a deposit account were dividends earned on fictitious securities, Robledo has said in court papers. Interest earned on deposits is taxed in full in Italy, while the rate on dividends is 5 percent.
. . .
Barclays used a Luxembourg unit to issue Turkish-lira securities that were purchased by its Milan branch, Robledo said in court documents. With several transactions involving a unit of Barclays in London and currency swaps, Barclays allegedly enabled UniCredit to earn interest of about 20 percent in 2007, or five times the amount it could have earned on the interbank market, Robledo said.”
Reuters describes the use of a “profit participation instrument (PPI) under a scheme called Project Brontos. This is merely making money out of money – as if there were a free lunch. Please, anybody who has served as a cheerleader for the financial sector – explain how this kind of financial prestidigitation does any good, any good at all for the productivity of the economy and the people of Italy or the UK.
Because I simply can’t fathom it.
