City of London contributes £63bn in taxes this year
A new report by PwC for the Corporation of London calculates an 18 percent jump in tax contribution from financial services
The financial services sector contributed an estimated £63 billion to UK government taxes this year, up 18 percent on last year and accounting for 12.1 percent of the total tax take, according to a new report.
The report comes as prime minister David Cameron vetoed the new EU treaty in a deal intended to resolve the euro zone debt crisis, leaving him facing intense criticism at home for having left Britain isolated within the EU because he refused to back down on the need for safeguards for the City of London.
European leaders have been pushing to introduced a Financial Transaction Tax, which British politicians and business leaders are against unless it is done on a global basis as it would hit the UK hardest as most of Europe's financial transaction are carried out in the City of London.
The rise of by £9.6 billion in this year's tax revenues from the financial services sector is due to the increases in corporation tax, VAT and employment tax, according to the report by PwC for the Corporation of London.
The study does not include the new bank levy paid for the first time in 2011 or the full impact of the 20 percent VAT rate, however the one-off bank payroll tax, charged on 2009 bonuses, was paid in this year totalling £3.4 billion, the report said.
"At a time when the City's value is being questioned, both in the UK and in Europe, these figures highlight the huge fiscal contribution it continues to make even in this extremely challenging economic environment," Stuart Fraser, policy chairman at the City of London Corporation, said.
"The industry continues to be resilient but the ongoing sovereign debt crisis highlights potential dangers ahead. In light of recent political events, it should be remembered that London is Europe's leading international financial and business centre, and the success of UK-based financial services is integral to the success of our counterparts across the Channel. Key to this is maintaining a vibrant single market that fosters jobs and growth across Europe," he added.
It if for this reason Fraser said that "we must be wary of crossing a tipping point when it comes to taxation".
The European Commission's own impact assessment has suggested that between 70 and 90 percent 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 would hurt the City, and hurt Europe," Fraser said.
He also used the publication of the report to question when chancellor George Osborne would get rid of the 50p tax rate as promised. There is currently little appetite among ministers to take action now given the swingeing public services spending cuts and squeeze on cash-strapped consumers.
Fraser said it "would help to reassure internationally mobile firms that the UK is committed to promoting a welcoming business environment".
The data provided by 43 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.
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