Financial services' contribution back to pre-financial crisis levels
THE FINANCE SECTOR contributed more than £66bn to the public purse over the last 12 months, figures released by the City of London Corporation and PwC show.
The survey, based on 48 of the City’s firms, found the Square Mile’s contribution amounted to around 11% of the total tax yield in 2014/15 – a 1.4% increase on the year before.
According to the report, the last time the financial services industry paid such a high level of tax was in 2007, before the financial crisis.
The increased tax contribution is driven by a rise in the amount generated from corporation tax (up 40.7% to £7.6bn) and the bank levy (up 22.7% to £2.7bn). The two taxes are relatively small components overall, with employment taxes at £30bn being the largest taxes collected. Employment taxes – which are determined by salary and number of employees – make a relatively stable contribution year on year.
Around 1.1 million people work in the sector – accounting for 3.4% of the country’s workforce – according to official figures. Employer’s national insurance remained the largest tax levied on financial services companies, accounting for 33.5% of taxes collected.
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.”