Take a look at the figures
New data reveals that the financial services sector has paid a record high of £72.1 billion in tax contributions in the last financial year. The report, commissioned by the City of London Corporation, is the highest amount of tax the sector has paid in the ten years that the data has been collected.
The figure is an increase of 1 per cent on the tax paid last year (£71.4bn) and equates to 11 per cent of all Government receipts.
The report, ‘Total Tax Contribution of UK Financial Services’, drafted by consultancy firm PwC, reveals the breakdown of the top three tax contributions:
- Employment taxes: the largest proportion of tax receipts from the sector came from employment taxes paid by both employers and employees, which contributed £31.4bn to the public purse and accounted for 43.5 per cent of the taxes from study participants;
- Corporation tax: increased from £8.4bn in 2016 to £11.6bn for the sector, the second highest tax contribution from participants in the study (14.9 per cent). The data includes the bank surcharge for the first time, which generated a total of £1.1bn;
- VAT: ranked as the third highest tax on financial firms, accounting for 14 per cent of the total.
Additional taxes, such as stamp duties and business rates, made up the rest of the tax-take.
The report is the tenth in the series of the data to be collected and shows that the combined amount of tax paid by the sector in the last decade amounts to £649bn.
The data was collected from a number of domestic and foreign banks, insurers and asset managers and other financial firms based in the UK from 1 April 2016 to March 31 2017. The report was completed just nine months after the referendum, and so it is too early to give an indication of Brexit’s impact on the tax-take for the financial services sector.
Location plays a key role in the generation of financial services taxes. For banks in particular, more than half the sector’s total tax take comes from employment taxes (53.5 per cent). If a large number of jobs were to leave the UK as a result of Brexit, then the tax revenues of the financial services sector would almost certainly be impacted.
Policy Chairman at the City of London Corporation, Catherine McGuinness, said:
“With Brexit edging ever closer, it is more important than ever to underline just how important the financial services sector is to the rest of the economy.
“The amount of tax paid by the sector in just one year could pay for around half of the annual NHS budget, or the lion’s share of the UK’s education budget.
“While it’s too early to gauge how the country’s tax-take might suffer if firms chose to move business away from the UK, these findings highlight how vital it is to meet the urgent needs of the sector as part of negotiations.
“Since the UK voted to leave the EU, the financial services sector has been crystal clear: we need urgent clarification around a transitional deal, a new mutually-beneficial trading relationship with the EU, and continued access to the brightest talent.”