City’s recovery drives finance firms’ tax bill up to £65.6bn

Tim Wallace
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The chancellor took £2.2bn from the bank levy in 2014

Finance firms paid a total of £65.6bn in taxes in the last financial year, up £600m on the previous 12 months, the City of London Corporation and PwC revealed today.

The sector pays 11.5 per cent of all government tax receipts, and increased its contribution by 0.9 per cent in the 2013-14 tax year.

Taxes paid by the finance industry are now closing in on their pre-crisis peak of £67.8bn in 2007.

But the make-up has changed. Corporation taxes have fallen from £12.2bn in 2007 to £5.4bn in 2014, as the tax rate fell and profits dropped.

By contrast, employment taxes and VAT payments have shot up over the period.

A total of £24.8bn is borne directly by the finance firms – such as corporation tax – while another £40.8bn was collected by them – including pay as you earn income taxes.

“Today, far more of the financial services sector’s total tax contribution comes from irrecoverable VAT, employers’ NIC and bank levy than when we started the study seven years ago,” said PwC’s Andrew Packman.

“Taken together, these taxes have a much greater effect on the finance sector than on other industry sectors and it is important that policy makers and the public understand that the UK tax system affects different industries in different ways.”

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