Total Tax Contribution of UK’s largest companies rises to £82.3billion, as broader economic contribution outlined in new research
Published at 00:01 AM on 15 December 2016
- 2.1 million jobs, 6.6% of UK workforce
£26bn of capital investment, £8bn in R&D
Taxes borne increase 3.6% to £23.7bn
The overall tax contribution of the UK’s biggest companies rose to £82.3 billion in 2016, up from £80.5 billion in 2015. This includes taxes that are a cost (taxes borne) of £23.7bn and those that businesses collect and generate of £58.6bn, and represents 13.3% of total government receipts. These findings come from the 2016 Total Tax Contribution survey for the 100 Group.
Taxes borne increased 3.6% from 2015, driven by increased corporation tax payments. While the statutory rate of corporation tax is at its lowest level since the survey began 12 years ago, more corporation tax is being raised since the banks can no longer offset all of their losses or compensation payments for tax purposes. There were also increases in the rate of the bank levy (revenue up 24.4% on the previous year).
The Total Tax Rate - a measure of the total tax cost compared to profit - now stands at 46.4%, up from 42.9 % in 2015 and 38.2% in 2008.
This year’s survey highlights how important financial services is to the UK economy. The tax contribution of this sector has increased over the past six years, and accounts for 43% of total taxes borne by the 100 group. Corporation tax payments from insurance companies were also up due to buoyant gilt and bond markets.
Meanwhile the contribution from the oil and gas industry has declined, mainly due to the fall in oil prices.
The impact of tax policy continues to vary by industry sector as companies contribute more than corporation tax to the public finances. Employers’ NIC and business rates continue to be the largest taxes borne, ahead of corporation tax in third place. Business rates is the largest tax for retailers, and a significant tax for telecoms and utilities. Bank levy is the largest tax for banks, and irrecoverable VAT continues to be a substantial tax for insurers.
Over half of the value distributed by the 100 Group goes to the Government in taxes (50.5%) and employees receive 31.8% in wages, leaving 12.0% of profit available for shareholders or for reinvestment and 5.7% for financing.
Andrew Bonfield, chair of the 100 group, said:
"Britain's biggest companies contributed a total of £82bn in taxes, £26bn in capital investment and £8bn in research and development last year, and provided jobs for almost 2.1m people. They also supported the activities and employment of many smaller companies in their supply chains. 100 Group companies will continue to work hard to ensure the UK remains a competitive place to do business so we can create more jobs and play our part in contributing to future growth.”
Kevin Nicholson, head of tax at PwC, added:
“Cutting the rate of corporation tax doesn't necessarily equate to lower tax bills, as the reliefs available are also being withdrawn. This broadening of the tax base means large companies are paying more corporation tax overall. But corporation tax remains a relatively small part of business' tax costs and is likely to stay that way as the rate continues to come down.
“The findings are a timely reminder of the value of the financial services sector to the public purse. With Brexit and continued regulation creating uncertainty, Government will be mindful of strangling a golden goose.”
Notes to editors
100 companies participated in the survey, generating robust, evidence based data on the tax contribution of large businesses. This represents 91% of 100 Group companies by number and 98% by market capitalisation.
Total Tax Contribution Framework
The survey was carried out using the PwC Total Tax Contribution (TTC) methodology. This makes a distinction between taxes borne and taxes collected on behalf of the Government. Taxes borne are the company’s immediate cost and will impact their results, such as business rates, corporation tax, employers' NICs and irrecoverable VAT. Taxes collected are those generated and administered by firms such as income tax under PAYE and NICs from employees, general VAT and excise duties.
The PwC TTC Framework provides a standardised methodology and a common language for companies to measure and communicate the taxes they pay. It provides a measure of what companies pay into public finances and contains data over and above the normal tax disclosures in companies’ financial statements.
The survey was conducted in 2016 and respondents comprised 100 companies in the 100 Group. Data was gathered for accounting periods ending in the year to 31 March 2016.
The report uses the data provided by participating companies which is extrapolated to represent the full membership for 2015 and 2016.
About The 100 Group of Finance Directors
The 100 Group represents the views of the finance directors of FTSE 100, several large UK private companies and some UK operations of multinational groups. Our member companies represent the vast majority of the market capitalisation of the FTSE 100, collectively employing over 6.6% of the UK workforce, and in 2016 paid, or generated, taxes equivalent to over 13.3% of total UK Government receipts. Our overall aim is to promote the competitiveness of the UK for UK businesses, particularly in the areas of tax, reporting, pensions, regulation, capital markets and corporate governance.
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