The UK’s financial services sector contributed an estimated GBP67.8bn (USD96.5bn) to UK government taxes in the financial year ending March 31, 2007 – 13.9% of the total UK tax take – according to a new report.
The report, by PricewaterhouseCoopers LLP (PwC) for the City of London Corporation, uses data provided by 32 large UK financial services companies and has been extrapolated to estimate the total tax take for the financial services sector as a whole.
Corporation tax was the largest tax borne: financial services companies paid GBP12.2bn in corporation tax, more than a quarter (27.5%) of total corporation tax paid in the UK economy. For every GBP1 paid in corporation tax, financial services companies contributed GBP1.50 in other taxes borne.
Employers’ National Insurance Contributions (NICs) was the second largest tax borne by companies, at GBP7.6bn. In addition, individuals working in the financial services industry paid GBP14.9bn in personal income tax through pay-as-you-earn (PAYE) and GBP3.2bn in employees’ NICs. This means an average of GBP25,000 tax paid per worker employed in the financial services industry.
The report concludes that 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. It predicts that, if revenues in the sector fall by 20%, corporation tax contributions would fall by GBP8.4bn to GBP3.8bn. 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 GBP1.3bn.
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.”
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