The total tax contribution (TTC) of the Financial Services (FS) sector in 2017 was £72.1bn, 11.0% of government receipts, up from 10% the previous year.
The total comprises taxes borne of £31.0bn (a 7.9% increase on the previous year) and taxes collected of £41.1bn (a 3.4% fall on the previous year).
Corporation tax (including the bank surcharge) paid by the FS sector, increased from £8.4bn to £11.6bn between 2016 and 2017. The bank surcharge features for the first time, raising £1.1bn, while the bank levy paid decreased from £3.4bn to £3.0 bn.
The major tax collected by FS companies is income tax deducted from employee salaries which represents over half the total, the other major taxes are employee NICs, Insurance Premium Tax and tax deducted at source from interest payments.
The profile of taxes borne by companies has changed across the ten years of the survey. Corporation tax including the bank surcharge now represents 21.8% of taxes borne (40.8% in 2007). Employers NIC is the largest tax borne by this group of companies (32.4%) followed by irrecoverable VAT (24.1%).
This is the tenth survey of the Total tax contribution of UK FS
What is total tax contribution?
The total tax contribution covers, firstly, the taxes that companies bear (ie pay out of their own resources), such as corporation tax, employer’s national insurance contributions (NIC), business rates and irrecoverable VAT.
The PwC analysis covers, in addition, the taxes that companies collect on behalf of government such as fuel duties, PAYE and VAT. These are the taxes collected.
The aggregate of taxes borne and taxes collected is, in the terminology of the PwC reports, the total tax contribution of the companies and sectors concerned.
Does the FS sector pay its fair share of taxes?
One measure of this is to compare the amount of taxes paid by the FS businesses with the gross value added (GVA) created by the FS sector. The taxes paid include those which the businesses pay themselves, taxes borne in the TTC terminology, and the taxes paid by the people those businesses employ plus other taxes such as fuel duties, insurance premium tax and irrecoverable VAT.
A House of Commons Library report The financial sectors contribution to the UK economy published in April 2017 estimated that in 2016, financial and insurance services contributed £124.2 billion in gross value added (GVA) to the UK economy, 7.2% of the UK’s total GVA.
This compares with the 11% of government receipts represented by the total tax contribution.