New figures show Financial services contributes £66.5bn in taxes
UK financial services tax receipts up for third year in a row and almost at pre-recession levels
- Financial services sector contributed an estimated £66.5 billion in taxes in 2014/15
- The total accounts for 11% of government receipts
- The total tax take is up by 1.4% from 2013/14 (£65.6 billion), to the highest level since 2007
- Taxes levied on companies (corporation tax, employers’ national insurance contributions, irrecoverable VAT and business rates) account for £26.2 billion, while taxes collected (employee income tax and national insurance administered through the payroll) account for £40.3 billion.
Figures published today (4 December) show that the total taxes paid by the financial services sector in the UK was £66.5 billion in 2014/15, the highest level since 2007. This represents 11% of total UK Government tax receipts, from a sector which employs over 1.1 million people, 3.4% of the UK’s workforce.
The report, the eighth produced in the series, was prepared for the City of London Corporation by PwC and gives a detailed breakdown of the different types of taxation and how the tax profile has changed since 2007. The increased tax contribution in this latest report is driven by increases in the amount generated from corporation tax (up 40.7% to £7.6bn) and the bank levy (up 22.7% to £2.7bn),. These two taxes are relatively small components overall, with employment taxes at £30bn once again being the largest taxes collected. Employment taxes - which are determined by salary and number of employees - make a relatively stable contribution year on year.
The report found:
- Employer’s NIC remained the largest tax levied on financial services companies, accounting for 33.5% of taxes collected
- This was followed by irrecoverable VAT (25.3%) and corporation tax (19.8%).
- Total employment taxes generated by the sector, including both taxes levied and collected remained broadly stable at £30 billion, representing 11% 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 industry continues to provide an outsize contribution to the Exchequer this year, once again producing 11% of tax receipts on 3.4% of employment. These figures show the enormous value of the financial services sector in underpinning the wider economy, the Government’s spending programme, and public services. Eight years after the financial crisis, the industry is growing at a strong pace, and is well and truly recovered from the economic shocks brought about by the crash.
In 2007, corporation tax represented 40.8% of taxes collected whereas in 2015 this has fallen to 19.8%, reflecting the introduction of the bank levy, which raised £2.7 billion in 2015, and reductions in the rate of corporation tax. This also reflects the increase in the proportion of irrecoverable VAT, rising from 19.1 % to 25.3% and employers’ NIC from 21.3% to 33.5%.
A record number of companies took part in the survey (48), representing 40.3 % 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:
“The policy of successive governments has meant that the burden of tax on companies has shifted from profit based taxes to other business taxes and this is particularly significant for the financial services sector. Irrecoverable VAT and employers’ NI together make up over half of taxes borne, with corporation tax less than a fifth. It is crucial to raise awareness of these other business taxes to understand the full contribution that the financial services sector makes to the public finances.”
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
The City of London Corporation provides local government and policing services for the financial and commercial heart of Britain, the 'Square Mile'. In addition, the City Corporation has three roles: (1) we support London’s communities by working in partnership with neighbouring boroughs on economic regeneration, education and skills projects. In addition, the City of London Corporation’s charity City Bridge Trust makes grants of more than £15 million annually to charitable projects across London and we also support education with three independent schools, three City Academies, a primary school and the world-renowned Guildhall School of Music and Drama. (2) We also help look after key London heritage and green spaces including Tower Bridge, Museum of London, Barbican Arts Centre, City gardens, Hampstead Heath, Epping Forest, Burnham Beeches, and important ‘commons’ in south London. (3) And we also support and promote the ‘City’ as a world-leading financial and business hub, with outward and inward business delegations, high-profile civic events, research-driven policies all reflecting a long-term approach. See www.cityoflondon.gov.uk for more details.
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