LONDON (Reuters) - Britain’s financial services sector contributed a record 71.4 billion pounds in taxes last year, highlighting the potentially big impact of the country’s vote to leave the European Union, according to the City of London Corporation.
There is growing speculation that banks based in Britain will lose their rights to sell services freely across the EU once the country exits the now 28-nation bloc, prompting some to relocate to the continent.
The total tax contribution from the financial services sector for the period to March 31, 2016 increased 7.4 percent from the previous year to the highest amount since the survey, compiled by PricewaterhouseCoopers (PwC) for the City of London Corporation, began nine years ago.
The tax take, which accounted for 11.5 percent of total UK government tax receipts, was driven in part by an increase in the amount of bank levy paid by banks and a rise in corporation tax payments, the survey found.
This included collecting 28.8 billion in “taxes borne” - such as corporation tax and national insurance contributions - and 42.6 billion in “taxes collected” - which are the taxes of employees collected by the company and paid to the government.
Employment taxes remained the largest component, accounting for 47.8 percent of the total tax take, with each of the over 1.1 million employees in the sector contributing on average 32,000 pounds.
“In light of the UK’s decision to leave the EU, these new findings not only demonstrate the significant contribution made to government revenues, but are also key in helping us to understand the potential impact of Brexit on different sub-sectors within financial services,” said Mark Boleat, Policy Chairman at the City of London Corporation.
Some large banks who use London to run their EU operations have said they could start moving staff as early as 2017 if there is no clarity on whether Britain will retain access to the European single market.
Although it was the highest amount paid since the report began nine years ago, as a percentage of government receipts, the 11.5 percent figure is lower than the record 13.9 percent estimated in 2007 before the financial crisis erupted, reflecting in part the job losses that ensued.
In total, 50 financial services companies, including banks and insurers, provided data on their UK tax payments for the 2016 study and together they employed 41.4 percent of the total employees in the sector.
Reporting by Anjuli Davies; editibg by Mark Heinrich