9 December 2009
UK Financial Services contributes £61.4bn in tax during
2008/09
Despite the effects of the global economic downturn, the UK’s
financial services sector continued to make a very significant
contribution to the public finances during the financial year to
March 2009, during a period which included the collapse of Lehman
Brothers, according to a new report by PricewaterhouseCoopers LLP
(PwC) for the City of London Corporation.
The industry contributed an estimated £61.4bn to UK government
taxes in the 2008/09 financial year, which accounts for 12.1% of
the total UK tax take.
This total has fallen by £6.4bn (9.4%) from the last benchmark
comparison made in the financial year to 31 March 2007 due to
reduced levels of corporation tax. Nonetheless, the sector as a
whole provided 17.7% of total government corporation tax receipts
in the financial year.
Financial services also remains a major employer in the UK, and
the study estimates that employment taxes to end March 2009 were
£26.4bn, an increase of 2.6% from 2007 showing the importance of
financial sector jobs to the wider economy.
Stuart Fraser, Chairman of the Policy and Resources Committee at
the City of London Corporation, said: "Ahead of the Pre-Budget
Report, this report highlights the crucial role that the financial
services industry continues to play in generating income for the
government despite the ongoing effects of the financial crisis.
"The industry contributes a significant amount to the exchequer,
and the imminent 50 per cent tax rate and other proposed changes
may provide a minor boost in the very short term. However, there is
always a tipping point where changes in the business environment –
both in terms of regulation or taxation – begin to affect a
country's competitiveness and damage the ability to attract top
talent, which may choose to move to rival financial centres
instead.
"We cannot afford to damage the competitiveness of an industry
that contributes over 12 per cent of total tax revenues –
especially with the government eager to reduce the budget deficit.
Losing the internationally mobile parts of the financial services
sector as a result of the cumulative effect of tax increases would
be disastrous for both levels of employment and the public
finances."
The research uses the PwC Total Tax Contribution Framework. The
data provided by 34 UK financial services companies, across the
range of sub-sectors, has been extrapolated to estimate the total
tax take for the financial services sector as a whole.
Ends
Notes to Editors
- A full version of the report is available to download
here:
www.cityoflondon.gov.uk/specialinterestpapers
- The City of London Corporation, which provides local government
services for the Square Mile, the financial and commercial heart of
Britain, works nationally and internationally to maintain and
enhance the City as a world-leading international financial and
business centre.
- PricewaterhouseCoopers provides industry-focused assurance, tax
and advisory services to build public trust and enhance value for
its clients and their stakeholders. More than 155,000 people in 153
countries across our network share their thinking, experience and
solutions to develop fresh perspectives and practical advice.
'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP
(www.pwc.com/uk) a limited liability partnership
incorporated in England. PricewaterhouseCoopers LLP is a member
firm of PricewaterhouseCoopers International Limited.
- For press enquiries please contact Sanjay Odedra on 020 7332
1835 or
sanjay.odedra@cityoflondon.gov.uk