Interesting front page story in today’s Wall Street Journal:  How a U.K. Banker Helps U.S. Clients Trim Their Taxes, by Carrick Mollenkamp & Glenn R. Simpson:

At Barclays PLC, a British bank steeped in 300 years of tradition, the work of a team led by banker Roger Jenkins is far from traditional. For instance, in 2003 his team set up a company with no employees, no products and no customers — just a mailing address in Delaware and a slate of British directors, mostly employees of his office. It was co-owned by Barclays and U.S. bank Wachovia Corp. The following year, according to documents filed in the United Kingdom, the jointly owned company had $317 million in profits. It paid U.K. taxes on them. Barclays and Wachovia were both able to claim credit for paying all of the tax….

The complex transactions involve a strategy called tax arbitrage, which plays off one nation’s tax system against another to reduce the banks’ tax bills. Barclays is the leader in this esoteric field. It collects hundreds of millions of dollars in revenue generated by Mr. Jenkins’s group. His team of lawyers and bankers has helped turn Barclays from a sleepy Main Street lender into an investment-banking power.

Critics of tax arbitrage are blunt about it. "This is just a complete and utter construct to get around the rules at both ends," says Richard Murphy, an accountant and professor who works with a London nonprofit called Tax Justice Network and has consulted for the U.K. government on financing. The banks say the cross-border deals have been cleared by both U.S. and U.K. regulators and the regulatory review process is rigorous.