Banks, Financial

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Economy

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Financial

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Financial

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Banks

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Categorized | Financial

Financial services tax take drops


Posted on December 19, 2012

Corporation tax payments from the financial services sector fell by a quarter in 2011-12 to £5.4bn, as the tax rate fell and profitability was hit by the European debt crisis and provisions for mis-selling payment protection insurance.

The decline, which saw the sector paying less than half the £12.4bn it paid at the peak in 2008, made it the second largest payer of corporate tax behind the oil industry, according to an annual study published by the City of London Corporation.

    In a sign of the effects of recent changes to the tax system, the declining corporation tax payments were offset by increased payments of irrecoverable value added tax, national insurance and other indirect taxes, according to PwC, the consultancy that prepared the study.

    A total of £63bn of tax was borne and collected by the sector in 2011-12, unchanged from 2010-11. The sector’s share of the UK’s total tax take fell slightly from 12.1 per cent to 11.6 per cent.

    Mark Boleat, policy chairman at the City of London Corporation, said: “These figures demonstrate the significant contribution that the UK financial services industry continues to make in terms of taxes and jobs even in this difficult economic environment.”

    Payments by banks, which are the largest component of the financial services sector, fell particularly sharply from £3.5bn to £1.3bn in the year to 2012. A levy on bank balance sheets contributed £1.6bn but its full impact will only be apparent in next year’s figures.

    Employment in the sector remained constant from the previous financial year at 1.1m (3.8 per cent of the workforce), and accounted for £27.7bn, 11.8 per cent of total employment taxes.