The UK financial services sector made an increased contributionto the public finances during the year to March 2011 even as theeconomy continued to suffer the effects of the European sovereigndebt crisis, according to a new report for the City of LondonCorporation by PwC.

The industry contributed an estimated £63.0bn to UK governmenttaxes in the 2010/11 financial year, accounting for 12.1% of thetotal UK tax take. The study does not include the new bank levypaid for the first time in 2011 or the full impact of the 20% VATrate.

This total has jumped by £9.6bn (18.0%) from the previous fiscalyear due to increased levels of corporation tax, VAT and employmenttax both borne and collected. The one-off bank payroll tax, chargedon 2009 bonuses, was paid in this year totalling £3.4bn. However,the bank levy was introduced after the study"s period closed andthe 20% VAT did not take full effect in the period.

Stuart Fraser, Policy Chairman at the City of LondonCorporation, said:"At a time when the City"s value is being questioned, both inthe UK and in Europe, these figures highlight the huge fiscalcontribution it continues to makes even in this extremelychallenging economic environment.

"The industry continues to be resilient but the ongoingsovereign debt crisis highlights potential dangers ahead. In lightof recent political events, it should be remembered that London isEurope"s leading international financial and business centre, andthe success of UK-based financial services is integral to thesuccess of our counterparts across the Channel. Key to this ismaintaining a vibrant single market that fosters jobs and growthacross Europe.

"That is why we must be wary of crossing a tipping point when itcomes to taxation. The European Commission"s own impact assessmenthighlighted that between 70 and 90 per cent of all derivativestrading could move outside of Europe if a financial transaction taxwas implemented. We must continue to make the case that such a movewould hurt the City, and hurt Europe.

"Domestically, a stable and sustainable tax regime is essentialto ensuring the perception of our international competitiveness isnot damaged. Greater clarity as to when the 50p tax rate will belowered would help to reassure internationally mobile firms thatthe UK is committed to promoting a welcoming businessenvironment."The sector employs more than 1.1 million employees, which is asignificant part (3.9%) of the total UK workforce.

The research uses the PwC Total Tax Contribution Framework. Thedata provided by 43 UK financial services companies, across therange of sub-sectors, has been extrapolated to estimate the totaltax take for the financial services sector as a whole.