Financial services contributes £65.6bn in UK taxes
UK financial services tax receipts up for another year and almost reach pre-recession levels
- Financial services sector contributes an estimated £65.6 billion in taxes in 2013/14, of which £24.8bn represents taxes borne and £40.8bn taxes collected
- Accounts for 11.5 per cent of government receipts
- Up by 0.9 per cent from previous year (£65 billion)
Figures published today (2 December) show that the total taxes paid by the financial services sector in the UK have reached £65.6 billion, the highest level since 2007. This represents 11.5 per cent of total UK Government tax receipts, from a sector which employs over 1.1 million people, or 3.7% of the UK’s workforce.
The report, now in its seventh year, was prepared for the City of London Corporation by PwC and gives a detailed breakdown of how taxation has changed dramatically over the time period. The report found:
- Employer’s NIC remained the largest tax borne, accounting for 34.8 per cent.
- This was followed by irrecoverable VAT (26.9 per cent) and corporation tax (17.1 per cent).
- Total employment taxes generated by the sector, including both taxes borne and collected increased to £30 billion representing 11.5 per cent of government receipts of Pay As You Earn and employer and employee National Insurance Contributions.
Commenting on the report, City of London Corporation Policy Chairman Mark Boleat said:
“The financial services sector remains an integral part of the country’s future prosperity and growth in the wider economy. What this shows in detail is just how the financial services industry is taxed and how this has changed as the government’s policies on taxation have altered. With the total tax almost at pre-recession levels, it goes to show just how the financial service industry and the economy as a whole are on the road to recovery.”
While the total taxes paid in 2014 (£65.6 billion) are similar in level to 2007 (£67.8 billion), the make-up of tax contributions has changed significantly. Corporation tax, which fluctuates with profit and the economic cycle, now accounts for a smaller proportion of tax take, while the proportion from more stable sources of revenue such as Employment taxes and consumption taxes has increased, reflecting changing Government tax policy and increased tax predictability.
In 2007, corporation tax represented 40.8 per cent of taxes borne whereas in 2014 this has fallen to 17.1 per cent, reflecting the introduction of the bank levy, which raised £2.2 billion in 2014, and reductions in the rate of corporation tax. This also reflects the increase in the proportion of irrecoverable VAT, rising from 19.1 per cent to 26.9 per cent and employers’ NIC from 21.3 per cent to 34.8 per cent.
A record number of companies took part in the survey (45), representing 41.6 per cent of industry employment, giving the most complete and transparent picture of taxation in the financial services industry possible.
Andrew Packman, PwC’s tax transparency and total tax contribution leader said: “Today, far more of the FS sector’s total tax contribution comes from irrecoverable VAT, employers’ NIC and bank levy than when we started the study seven years ago. Taken together, these taxes have a much greater effect on the FS sector than on other industry sectors and it is important that policy makers and the public understand that the UK tax system affects different industries in different ways.”
Notes to editors
Bella Longman, Media Officer, City of London Corporation
Tel: 020 7332 1906 / Mobile: 07809 334 327
About the City of London Corporation
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