15 December 2016
My children were in primary school when I first started working on the Total Tax Contribution (TTC) project for the 100 Group of Finance Directors. That was twelve years ago and they’ve left home now. But each year that we work on the TTC project, I’m fascinated by the new insights that are revealed.
In 2016, corporation tax was just one fifth of the taxes borne by the 100 Group companies (broadly the FTSE100). The current focus on corporation tax often does not take account the broader contribution companies make in other taxes such as business rates, employers’ national insurance, bank levy and irrecoverable VAT. I remember the surprise in the first survey in 2005 when we found that, for every £1 of corporation tax, there was another £1 of other business taxes. It was the first time that data had been collected from companies to create that insight. There would, I suspect, have been disbelief if someone then had forecast the ratio of £1 to £4 today.
But that is a reflection of the UK tax system for large corporates today. Business rates, levied on property, are the largest tax borne for the retailers in the survey; bank levy, based on liabilities, is the largest tax for the banks and irrecoverable VAT, charged on purchases, is significant for the insurers. The contribution made through these taxes is often significant and little understood.
So how do you explain the tax system? There’s no silver bullet and it will take some time and effort. But understanding the broader contribution made by large business to the public finances in all taxes will, I hope, be one strand of the answer. Findings from this year’s survey available here.