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.
Download Total Tax Contribution - 2nd edition
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.
Download Total Tax Contribution - 2nd edition
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