Figures produced for the City of London show the UK’s financial services sector contributed an estimated £67.8bn to UK government taxes – 13.9% of the total UK tax take – in the financial year ending 31 March 2007.
The figures are contained in a new report by PricewaterhouseCoopers LLP (PwC) for the City of London Corporation and are based on data provided by 32 large UK financial services companies which has been extrapolated to estimate the total tax take for the financial services sector as a whole.
According to the report, corporation tax was the largest tax borne: financial services companies paid £12.2bn in corporation tax, more than a quarter (27.5%) of total corporation tax paid in the UK economy. For every £1 paid in corporation tax, financial services companies contributed £1.50 in other taxes borne.
Employers’ National Insurance Contributions (NICs) was the second largest tax borne by companies, at £7.6bn. In addition, individuals working in the financial services industry paid £14.9bn in personal income tax through PAYE and £3.2bn in employees’ NICs. This means an average of £25,000 tax paid per worker employed in the financial services’ industry.
The financial services sector contribution to the government’s tax take is likely to fall as a result of the financial crisis and economic downturn. The report predicts that, if revenues in the sector fall by 20%, corporation tax contributions would fall by £8.4bn to £3.8bn. Employment taxes are also likely to fall as jobs are lost in the financial services sector. The research predicts that for every 5 % fall in employment (50,000 job losses) there would be a reduced contribution in employment taxes of £1.3bn.
A spokesperson for the City of London Corporation said: “This timely research is a useful snapshot of the financial services sector’s contribution to the UK’s public finances.”