A lucrative Luxembourg tax arrangement has allowed Barclays PLC (LSE:BARC) to pay less than 1% of its profits in the tax haven for more than a decade, allowing it to avoid nearly £2bn in taxes.
According to the Guardian, the bank is still reaping the benefits of a controversial decision in 2009 where the sale of a US$15.2bn fund management business sale was lodged in Luxembourg rather than the UK, where it is headquartered.
Through the move, Barclays was able to offset future profits against the drop in value of shares it received from the transaction, the newspaper claimed.
Luxembourg is Barclays' third most profitable jurisdiction after the US and the UK, with a turnover of £1.1bn in 2021.
Having low staff costs, as it employs only 54 people in Luxembourg, allows Barclays to turn nearly all of that income from corporate and investment banking into profit.
In the UK, the bank employs 46,000 people and nearly 10,000 in the US.
The bank has made a cumulative profit of £6.6bn from its Luxembourg operations since 2013, according to its annual tax filings with a tax bill of just £46mln on these earnings.
Without the offset, Barclays could have faced taxation of between 25% and 30%, the report adds.