Banks will find it difficult to avoid tax on their profits from 2016 iStock

Howls of outrage have greeted the humdinger of a story that seven of the biggest investment banks operating in the City of London paid little or no tax in Britain last year despite reporting billions of dollars in profits.

You can see the reason behind the outrage. This latest tax scam looks like yet another example of egregious international corporations ripping off the British taxpayer by skirting the rules through fancy tax dodges. Coming after the latest revelation that another US tech giant, Netflix, is not paying UK tax, it does rather look as though our island is the safe haven of choice for tax-avoiders.

Look at the numbers. According to a fantastic piece of research by Reuters, the seven banks - four US banks, one Japanese, one German and the other Swiss - between them paid a paltry $31m (£21m) in UK corporation tax in 2014. What's more, the magnificent seven made revenues of $31bn in the UK, earned profits of $5.3bn and employed 33,000 people in London. Hardly suffering.

Yet we only know this because for the first time banks have had to make public details of their tax on a country-by-country profit - what's known as CBCR - and their tax breaks because of a new European rule change, which came into effect in 2013.

By analysing these new CBCR figures, Reuters was able to discover that five of the seven banks, JP Morgan, Bank of America Merrill Lynch, Morgan Stanley, Deutsche Bank, Nomura Holdings – paid no corporation tax at all.

By any measure, the total $31m tax paid by the banks is tiny on such big profits. And most of that came from Goldman Sachs UK Ltd., the US bank's London arm, which paid $26.6m tax on revenues of $2bn. Tiny, but more than any of its peers.

What's more astonishing is that the seven banks were able to pay so little by following the letter of the law; even Santa would find it hard to say they have been behaving badly. From what is known, the banks used a combination of tax losses generated during the banking crisis to reduce their tax bills as well as more complex tax breaks using foreign tax credits and the so-called profit shifting and other foreign tax credits.

This is when companies book the profits made in the UK into another, lower tax jurisdiction such as Luxembourg, perhaps because they made loans out of the other country. All perfectly above board.

So it's worth looking at a couple of the cases in more detail to see exactly how the magnificent seven have got away with paying no tax. Take Bank of America Merrill Lynch and UBS; both were able to set tax against historic losses.

According to Reuters, BoA Merrill Lynch wiped out its entire tax bill on $550m of profits by bringing forward historical losses - the bank has about $8bn in tax assets to use against tax following the $34bn of losses it incurred in the UK in 2007 and 2008.

JP Morgan avoided paying tax in a different way. Although it was by far the most profitable investment and commercial bank in the UK in 2014, making $2.6bn in profits, it paid no tax. Indeed, the bank explained in its country-by-country report, the so-called CBCR, that it had a 2014 UK tax liability of $524m.

But it was able to offset this through foreign tax credits, deducting overpayments in previous periods and the "benefit of other available tax reliefs". What JP Morgan does not explain, however, is what those tax credits were, or what the overpayments were for.

This is not good enough. Chris Morgan, tax partner at KPMG, says that while the new CBCR rules are a great start, the banks should be giving far greater explanation and explaining the precise details of those credits, et al. He adds: "If you can't explain, then don't do it would be my recommendation."

Whether the banks will give more detail next year when they report again is a moot point. The big US banks seem less worried about reputation risk than their US peers, such as Google and Facebook, which do appear to be responding to criticism over their UK tax affairs; or lack of tax affairs.

However, whether they like it or not, the tax regime is changing fast and being forced to adapt to a more fit-for-purpose model. For example, from this tax year, banks will only be able to apply the so-called losses - or 'deferred' tax assets - to 50% of their UK taxable profit.

There are more changes afoot which should force foreign companies to pay more tax. Morgan, who with KPMG and the CoVi think-tank is behind the Responsible Tax project, adds that new updates due next year on the tricky issues of dealing with the way companies use base erosion and profit shifting to avoid tax from the OECD will come into play.

Known as BEPS, the base erosion and profit shifting rules are the main reasons why the big US tech companies such as Google and Facebook have got away with paying so little tax. As is often the case, the reason they have been able to pay so little is because of 100-year-old arcane tax practices which said that if you traded with a country – but not in a country – you only have to pay taxes on ancillary profits.

Not for much longer. Let's give credit where credit is due. Thanks to intense lobbying by the UK government over the last few years– together with the OECD – it should be tougher from next year for the Googles and Amazons of this world to stay in the cloud and avoid paying tax through BEPS. Or at least that is the hope. If not, the howls will get louder.