4 Dec 2015 10:30am

Financial services pay highest tax bill since crisis

The financial services sector paid £66.5bn in taxes last year, the highest bill since the financial crisis, according to new research

The City of London Corporation and PwC - which carried out the research - said the sector's contribution increased from £65.6bn in 2013/14.

The tax paid represented 11% of the total UK government tax receipts, down from 11.5% last year.

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). At £30bn, employment taxes made up the largest amount collected.

The report also found there were 1.1 million people employed by the sector, generating £30bn in taxes.

Mark Boleat, City of London Corporation policy chairman said, “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.”

Employer’s NIC was the largest tax levied, accounting for 33.5% of the total tax borne, followed by irrecoverable VAT (25.3%) and corporation tax (19.8%).

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.

“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.”

In 2007, corporation tax represented 40.8% of taxes collected, while in 2015 it fell to 19.8% due to the introduction of the bank levy and reductions in the rate of corporate tax.

The study surveyed 48 companies, which represent 40.3% of industry employment, and looked into the total taxes that are borne by these businesses and on the taxes they administer and collect on behalf of the government.

Jessica Fino

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