UK banking Total Tax Contribution estimated as £31.3bn in 2014

• £13.2bn of the Total Tax Contribution was taxes borne by banks
• PwC estimates that £15.3bn was paid by UK headquartered banks and £16bn by foreign headquartered banks

The UK banking sector contributed an estimated £31.3bn in taxes borne and collected (see notes to editor) in the year to 31 March 2014, making up 5.5% of Government receipts.  This is according to a study carried out by PwC for the British Bankers’ Association (BBA), published today.  The report also reveals that the contribution from irrecoverable VAT is larger than corporation tax and bank levy added together, with employment taxes making up over half of the contribution. Additionally, corporation tax is only 11.4% of total taxes borne. For every £1 of corporation tax paid, there is £7.80 in other taxes borne.

Andrew Packman, Total Tax Contribution leader at PwC in the UK, commented:

“This study yields data that has not been previously available and gives a clearer picture of how the banking sector’s substantial tax contribution to the Exchequer is generated.  In the current tax environment, with the taxation of the banking sector under considerable scrutiny, providing robust data regarding its contribution is important in informing both policy decisions and public debate. There’s a lot of interest in how banks are taxed.  Having the full picture of all the taxes that banks bear is important for this debate.”

Employment taxes make up £17.6bn of the Total Tax Contribution total (borne £4.4bn, collected £13.2bn) and are 5% above pre-recession levels in 2008. 

2014 Total Tax Contribution of the UK banking sector as a percentage of total UK tax receipts

£’bn	Extrapolated to UK banking sector	As a % of Government receipts
Corporation tax	1.6	4.1%
Bank levy	2.2	100%
Employment taxes borne	4.4	0.8%
Irrecoverable VAT	4.0	0.7%
Other taxes borne	1.0	0.2%
Total taxes borne	13.2	2.3%
Employment taxes collected	13.2	2.3%
Other taxes collected	4.9	0.9%
Total taxes collected	18.1	3.2%
Total Tax Contribution	31.3	5.5%

 *Percentage of Corporation Tax receipts

**Percentage of Bank Levy receipts

 

Simon Hunt, UK banking and capital markets leader at PwC, commented:

 

“At a time when the banking sector continues to rebuild its reputation, this study provides an important reminder of the significant role our banks continue to play in contributing to the UK economy, both through direct taxation and as a large employer.”

Ends

Notes to editor:

• Data was provided by twenty-nine banks covering 92% by number of employees in the banking sector.
• The members taking part in the study provided data on their tax payments in their accounting period ended in the year to 31 March 2014, for most this was the year ended 31 December 2013.  The study also incorporates Total Tax Contribution data collected from banks in other surveys, the Total Tax Contribution survey for the 100 Group of Finance Directors and the Total Tax Contribution of the UK Financial Services sector, a survey carried out for the City of London.  These surveys hold some data for banks for prior years.  It has been collected using the same methodology and we have therefore been able to compare results over a number of years, starting in a pre-recession year, covering the financial crisis and up to the current time.
• The data collected by the study is not available elsewhere and therefore provides a valuable resource for the UK banking sector, Government and other stakeholders.
• Taxes borne are the company’s own contribution in taxes that impact their results, e.g. corporation tax, employer NIC, irrecoverable VAT and bank levy
• Taxes collected are those that the company administers on behalf of Government and collects from others, e.g. income tax deducted under PAYE, tax deducted at source, stamp duty reserve tax. Taxes collected will have an administrative cost for the company which will also have an impact on the company’s business.