City paid a staggering £53.4bn in tax last year – more than a tenth of total government tax receipts.
The report carried out by PwC for the Corporation of London shows tax paid by the UK’s financial services industry is ahead of any other sector.
Business leaders and industry figures lauded the City for its contribution to the UK and called for politicians to heed its importance to the public purse.
Banks were the biggest tax payers in the financial services sector, with their contribution set to rise even further next year when the £3.4bn raked in through the bonus tax, which was levied from 2009 but collected after the year-end in March, is taken into account.
In corporation tax alone financial services brought in £5.6bn, down from £7.6bn after a tough financial year. In contrast oil and gas firms saw their corporation tax receipts plummet from £10.3bn in 2009 to just £5.5bn as they struggled in the wake of the recession. Overall the amount of tax paid by the financial services industry fell £8bn – down from £61.4bn in 2009, which equated to 12.1 per cent of total tax receipts.
The total tax paid as a percentage of profit was 48.5 per cent, down from 57.4 per cent the year before.
More than 1m are employed by the sector, equivalent to 3.5 per cent of the workforce, with total employment tax of £24.5bn. The average amount of tax paid by each employee was more than £40,000, on a salary of £71,236. The number employed fell 7.9 per cent year-on-year.
National insurance contributions accounted for 39.7 per cent of taxes, with VAT at 23.9 per cent and corporation tax at 16.6 per cent.
Corporation of London policy chairman Stuart Fraser told City A.M. the findings prove the City is a vital contributor to the UK.
He said: “This report shows the vital contribution made by the financial services industry to the Exchequer even as the effects of the crisis weighed on institutions across the City. I was surprised the drop was only £8bn, given the effects of the financial crisis. Next year, I suspect that the £8bn will be almost recovered. I’m very concerned that new bonus rules could drive talent away from the UK.”
Anthony Browne, the Mayor of London’s adviser for economic development, said: “These figures are a good message for the rest of Britain. It is in everyone’s interest that there is a thriving financial services sector.”
Angela Knight, chief executive of the British Bankers’ Association, said: “This shows just how significant the UK financial services industry is to the UK economy in tax and employment.
“We have always maintained that the industry is a big taxpayer – it pays a lot of tax despite perceptions to the contrary. If this is what the industry is contributing, in a year like this, then imagine what it would pay in better years.” Luke Johnson, who founded Pizza Express and is a former Channel 4 chairman, added: “This is a tangible demonstration of the vital role that financial services and the Square Mile plays in the UK economy. It is the engine of growth for the capital city and, to put it bluntly, the UK as a whole. If we demonise the City and the key players emigrate, then the nation as a whole will be losers.