June 8, 2010 • 11:00 pm

The extent to which taxes can be placed on high earners in an economy is an issue that sharply divides politicians and economists.

A range of claims are made about the possible effects that higher taxes on banks, or their bankers, would have on the economy and the level of revenue such levies could raise – not all of them accurate.

For instance just last week, Radio 4’s More or Less programme showed Lord Jones had got his facts wrong in claiming the City accounted for a quarter of tax receipts in the UK.

While the City is undoubtedly a significant part of the economy, contributing hefty sums to the Government, there appeared to be further over-estimation of its contribution this morning.

The Claim

Discussing the issue of foreign takeovers of UK firms in a radio interview earlier today, Richard Madden, Chief Executive of DC Advisory Partners, made the point that as long as firms contributed to the UK economy, their national origins did not matter.

“I’m delighted to have a US company – Goldman Sachs, for example – employing, 5,000 people in the UK, who pay £1.5 billion of income tax and who pays over £1 billion of corporation tax,” he said.

Undoubtedly the so-called “masters of the universe” will generate sizeable sums to be taxed in terms of profit and pay. But given Mr Madden’s figure of 5,000 people employed by Goldman Sachs, does each employee really pay an average of £300,000 in income tax?


The figure does not appear to be far fetched when looking at past press reports. For instance, in August 2009 the Daily Mail reported that the Treasury was set to gain £1.1 billion in income tax from Goldman employees.

Likewise Evening Standard columnist Simon English estimated the amount to be in the £1 billion region.

However, Full Fact contacted Goldman Sachs to try and find out if they held the figures to substantiate the claim.

Although no figure was available specifically for income tax payments, a spokesperson for the company was able to give us an estimate of the amount paid that suggests the number was much lower than those given above.

“We expect the combined payments of the firm and its employees in terms of PAYE, National Insurance and VAT to be close to £1 billion, and in the accounts we disclose our estimate for the UK bonus tax relating to 2009 but payable in 2010, which we say we expect to be in excess of $600m (or approximately £400 million),” she said.

Adding these figures up would give a total of roughly £1.4 billion, but income tax is only one part of this sum, so the claim does not appear to be accurate.

Judging with any more precision becomes difficult, although we can deduct $510 million, or approximately £350 million, from the number for the employer national contribution numbers listed in Goldman’s 2009 financial statement. After this it is largely guesswork.

We spoke to accountant and tax expert Richard Murphy who confirmed that further estimates around tax contributions would be hard to calculate accurately.

“This is puffery. We can’t prove or disprove it, therefore it is nonsense and anyway it isn’t the bank’s tax bill,” he said.

Where Mr Madden was correct however, was on the amount of corporation tax paid. The financial statement shows that roughly $1.7 billion was paid in corporation tax, meaning the figure cited this morning of “over £1 billion” is about right.

However, Mr Murphy also raised concerns about claims made about any firm generating tax revenue for the UK Treasury – particularly income tax.

“Not one penny of that is the liability of Goldman Sachs, it’s the liability of the bankers who are working for Goldman Sachs,” he said.

“Goldman Sachs can’t claim any of that as being their contribution to the economy it’s the contribution of the bankers who owe it.”

“The claim that somehow they have made a God given contribution to the UK economy is nonsense. The UK economy has given them the opportunity to make money”.


Goldman Sachs undoubtedly pays some very large sums into the Government coffers, either directly on behalf of its employees. So Richard Madden’s point about the contribution of non-UK companies to the UK economy still stands.

However the estimates provided to Full Fact suggest that some of the numbers bandied around about Goldman’s income tax contribution appear wide of the mark.

Such confusion only serves to complicate a heated debate about the level of taxation placed on high earners such as bankers, and the subsequent effect on tax revenues.

For instance, figures reported by the World at One yesterday suggested that the levy the previous Government placed on the so-called ‘non-doms’ had raised £130 million, far short of the £600 million it was hoped the tax would eventually raise.

Clearly, estimating the tax paid by one group of people, or what they would pay should rate change, is a contentious business at the best of times, strengthening the case for accurate statements of the facts when they are made.


Patrick Casey

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