The report by PwC and the City of London Corporation shows how much the UK financial services industry makes for the UK government.
New data reveals that the financial services sector has paid a record high of £72.1 billion ($95.8 billion) in tax contributions in the last financial year, according to a report by PricewaterhouseCoopers. The figures show the sector is important in paying into public coffers, a factor weighing on minds because Brexit has raised concerns that the UK might face barriers to EU markets.
The Total Tax Contribution of UK Financial Services report, which was commissioned by the City of London Corporation, revealed the sector paid the highest amount of tax in the ten years that the data has been collected. 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 31 March 2017. The report was completed just nine months after the referendum, and is too early to give an indication of Brexit’s impact on the tax-take for the financial services sector.
The figure is an increase of 1 per cent on the tax paid in the previous financial year (£71.4 billion) and equates to 11 per cent of all government receipts.
The report 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 £31.4 billion to the public purse and accounted for 43.5 per cent of the taxes from study participants.
-- Corporation tax: increased from £8.4 billion in 2016 to £11.6 billion 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 £1.1 billion.
-- 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.
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.
The UK’s financial services sector employs more than 3 per cent of the country’s workforce, accounts for 7 per cent of output and pays for 11 per cent of total public spending.
For the first time in the report series, the data shows where the majority of financial jobs are located. Firms taking part in the study reported that Scotland (13.6 per cent) and the South East (12.4 per cent) employ the most financial services workers behind the UK’s capital, London (32.7 per cent). Northern regions also account for a high number of the country’s financial sector workforce, with the North West (9.4 per cent) coming in as the fourth biggest employer and Yorkshire & Humber ranking fifth (7.5 per cent).
“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,” said policy chairman at the City of London Corporation, Catherine McGuinness. “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.
McGuinness added: “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.”