LONDON: The UK’s financial services sector paid a record GBP71.4bn (USD93.4bn) in tax in the year to March 31, 2016, a 7.4 percent increase on the figure for the previous year.
According to figures published by the City of London Corporation, revenues from financial services contributed some 11.5 percent of total UK tax receipts. Its report, produced by PwC, said that banks and insurance companies are the highest tax-paying sub-sector following reforms to corporation tax and the bank levy.
Financial companies paid GBP8.4bn in corporation tax in 2015 compared with GBP7.6bn a year earlier, with bank levy revenues increasing more than 25 percent to GBP3.4bn. According to the report, for every GBP1 of corporation tax paid – one of the largest direct taxes – financial services firms contribute another GBP3.83 paid in other direct taxes.
“In light of the UK’s decision to leave the EU, these new findings not only demonstrate the significant contribution made to government revenues, but are also key in helping us to understand the potential impact of Brexit on different sub-sectors within financial services,” said Mark Boleat, Policy Chairman at the City of London Corporation. “As one of the UK’s biggest service exporters, it’s understandable the sector also contributes a considerable amount of tax.”
“Despite this, the sector arguably stands most to lose as negotiations loom. It makes it clear the argument that Government should be engaging with firms as it approaches talks with the remaining EUR27, and the pulling of the political trigger.”
Andrew Kail, Head of Financial Services at PwC, said: “The City of London Corporation report shows the continued importance of the financial services sector to the UK Exchequer and the wider economy. Specifically, the report highlights an increasing reliance on tax receipts from banking and insurance firms. This is balanced against a backdrop of downward pressure affecting return on equity for the banks in particular, resulting from regulatory changes and the low interest rate environment.”
“With the added potential adverse impacts of Brexit on the sector, the question arises as to whether the current levels of tax contribution are sustainable.”
