UK financial services tax contribution continues to grow
The UK financial services sector contributed an estimated £63bn in UK government taxes in the 2010/11 financial year, accounting for 12.1% of total UK tax revenue, according to a report for the City of London Corporation by PwC.
The tax contribution of the financial sector rose by £9.6bn or 18% from the previous fiscal year in spite of the economic difficulties caused by the European sovereign debt crisis, the report said.
The increase is due to higher corporation tax, value added and employment taxes both borne and collected. The one-off bank payroll tax, charged on 2009 bonuses, was paid in this year totalling £3.4bn. However, the bank levy was introduced after the study’s period closed and the 20% value added tax did not take full effect in the period, and they were not included in the study.
Stuart Fraser, policy chairman at the City of London Corporation, said the figures highlighted the huge fiscal contribution the City makes even under difficult economic circumstances.
The financial industry is resilient, but the ongoing sovereign debt crisis highlights potential dangers ahead, he said. London is Europe’s leading international financial and business centre, and the success of UK-based financial services is integral to the success of its counterparts across the Channel.
Fraser urged especial caution about taxation. The European Commission’s impact assessment highlighted that between 70% and 90% of all derivatives trading could move outside of Europe if a financial transaction tax was implemented. “We must continue to make the case that such a move [a transaction tax] would hurt the City and hurt Europe,” he said.
“Domestically, a stable and sustainable tax regime is essential to ensuring the perception of our international competitiveness is not damaged.
Greater clarity as to when the 50p tax rate in the UK will be lowered would also help to reassure internationally mobile firms that the UK is committed to promoting a welcoming business environment, he said.