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British financial services sector pays record tax bill

By Lawrence Gash

City of London underlines its importance ahead of Brexit deadline

According to a new report on behalf of the City of London Corporation, the United Kingdom’s financial services sector contributed a record £75.5bn ($79bn, €88.7bn) in taxation in 2019. This accounts for 10.5 per cent of all government tax receipts.

Compiled by accounting firm PwC, the report found that although only 3 per cent of the British workforce is employed in the financial services sector, it contributed 11.6 per cent of the UK’s total employment taxes in the year to March.

Looking to the year ahead the report stated: “Legislative changes, technological innovation and the uncertainty surrounding Brexit are all expected to have some impact on the total tax contributions of the sector.”

These latest figures demonstrate how important the financial services sector is in the maintenance and funding of the British state. With Prime Minister Boris Johnson set to start his post-Brexit trade negotiations with the European Union in February, safeguarding this healthy cash cow will be at the forefront of his mind.

Catherine McGuinness, chair of policy at the financial district’s municipal body, the City of London Corporation, emphasised this point following the publication of the report. She said: “The UK must remain competitive to safeguard the sector’s employment base and significant tax contribution. It will play a critical role in fuelling our economic success after we leave the European Union.”

The City has called on Downing Street to facilitate its ability to hire internationally following Brexit and for further cuts to corporation tax. While Boris Johnson may feel that these latest figures vindicate his repeated defence of the "Laffer curve" principle, whereby the lower the rate of taxation the higher the tax revenue, he will be reticent to cut taxes further in the short term having promised to maintain corporation tax at its current level at December’s general election.

With Chancellor of the Exchequer Sajid Javid vowing to make good on his pledge to “level up” the geography of Britain’s economy, any forthcoming cuts will target northern England and the Midlands rather than the Square Mile.

FURTHER READING: EU braces for an incredible shrinking feeling post-Brexit

FURTHER READING: UK to introduce inflation-busting national minimum wage rise

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