Financial services paid out £63bn in taxes, says survey

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THE UK’s financial services sector contributed an estimated £63bn in taxes in the year to March 2011, an increase of 18 per cent on the previous year, according to a survey by PricewaterhouseCoopers.

The report for the City of London Corporation said the increase in the sector’s tax contribution was due to a rise in the levels of corporation tax, Value Added Tax (VAT) and employment tax.

The one-off bank payroll tax, charged on 2009 bonuses, was paid in this year, totalling £3.4bn.

However, the bank levy was introduced after the study period closed, and the VAT rise to 20 per cent did not take full effect in the period.

Stuart Fraser, policy chairman for the City of London Corporation, said: “At a time when the City’s value is being questioned, both in the UK and in Europe, these figures highlight the huge fiscal contribution it continues to make, even in this extremely challenging economic environment.

“The industry continues to be resilient but the ongoing sovereign debt crisis highlights potential dangers ahead. In light of recent political events, it should be remembered that London is Europe’s leading international financial and business centre, and the success of UK-based financial services is integral to the success of our counterparts across the Channel. Key to this is maintaining a vibrant single market that fosters jobs and growth across Europe.

“That is why we must be wary of crossing a tipping point when it comes to taxation.”

Prime Minister David Cameron has faced criticism for leaving Britain isolated within the European Union by refusing to back a treaty to entrench fiscal discipline in the eurozone, because it did not include measures to protect Britain’s finance industry.

Mr Cameron, whose demands were rejected, defended the move by saying the finance industry was vital to the economy.

Critics have accused him of trying to protect the City of London, to the detriment of other sectors, such as manufacturing. Earlier this week, Mr Cameron told MPs he had negotiated in “good faith”, but was forced to block a treaty of all 27 member states after other EU countries refused to agree to “modest, reasonable and relevant” safeguards for the City of London.

Mr Cameron was given a rousing reception by eurosceptics on his own benches, who hailed him for standing up for UK interests at the European Council meeting in Brussels.

Mr Cameron told MPs: “The choice was a treaty without proper safeguards or no treaty and the right answer was no treaty. It was not an easy thing to do, but it was the right thing to do.”

But Labour leader Ed Miliband accused Mr Cameron of neglecting the national interest in order to appease Conservative eurosceptics with a result that was “bad for business, bad for jobs, bad for Britain”.