15 years of measuring Total Tax Contribution

November 28, 2019

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by Andrew Packman Total Tax Contribution and Tax Transparency leader, PwC United Kingdom

Email +44 (0)189 552 2104

by Janet Kerr Senior Manager, PwC United Kingdom

Email +44 (0)7841 781417

Fifteen years ago we observed that the amount of corporate tax paid by large businesses was coming under increasing scrutiny amid much public debate. At the time, there was very little information in the public domain about the tax contribution of large companies. Clients we spoke to about this felt that though they paid many taxes in addition to corporation tax, there was too little understanding of this broader contribution. Indeed, outside of the corporation tax reported in their annual reports, many companies themselves did not have a detailed picture of their overall tax contributions.

So the Total Tax Contribution (TTC) framework was conceived. At the request of the Chair of the 100 Group of Finance Directors, we used the TTC framework to review the 100 Group membership (broadly the FTSE100). The first year we focused on only taxes borne (19 business taxes) and 66 members of the 100 Group provided TTC data, with others saying they wanted to be involved. The following year, we used the framework to look at both taxes borne and collected (22 business taxes), which allowed us to pull together the first full picture of the total tax contribution of the 100 Group to the UK public finances. This is the format we’re still using today, which has generated a large bank of comparable data across the period.

In 2005, the largest element of taxes borne came from profits, including the much-talked-about corporation tax, which was then 50% of taxes borne. Fifteen years later, the picture has changed and corporation tax is now just a quarter of taxes borne by these large UK-based companies.

This certainly doesn’t mean that companies are paying less tax. In fact, over the period, taxes borne and collected have continued to rise, both in the number of taxes and the total amounts contributed. For example, the amount paid in business rates has increased by 94% since the survey began. Now, for every £1 of corporation tax, £3.05 is paid in other business taxes borne. In 2005, the ratio was 1:1. For the last five years, the total tax contribution of the 100 Group has been in excess of £80bn each year.

Since the survey began in 2005, we’ve seen a shift away from taxes on profit towards other business taxes, based on people, production and property. While this has provided a more stable source of revenue for the government it has also had a differential impact on sectors. Low-margin businesses with lots of buildings and employees, such as retailers, have been particularly affected. Similarly, banks and financial institutions, some of which also have a specific bank levy to pay, have high levels of irrecoverable VAT.

The overall picture of taxes borne and collected has changed, with oil and gas featuring heavily in the early years while higher levels of irrecoverable VAT and the introduction of the bank levy in 2011 have created more of a focus on financial services in recent years. In 2019 we identified 28 business taxes in the UK under the TTC methodology, including the latest - the soft drinks industry levy - introduced in April 2018.

The total tax contribution of the 100 group has changed a lot over the years as the government has moved to manage the issues of the day. As the government grapples with the need to respond to the digitisation of the economy, climate change, automation and artificial intelligence, among others, we can expect taxes to continue to change and flex according to the needs of the day. What will the total tax contribution of 2034 look like? Time will tell.

The 2019 Total Tax Contribution of the 100 Group was published this week. If you’d like to know more about the tax contribution of the UK’s largest businesses, please read our report or get in touch. Also look out for our next blog as Marissa Thomas, PwC’s UK Tax Lead, highlights some of the key takeaways from our launch event.

Notes on TTC

  • This is the 15th year of PwC’s Total Tax Contribution of the 100 Group report.
  • The TTC surveys for the 100 Group use the PwC TTC methodology, which looks at taxes borne and taxes collected whilst clearly distinguishing between the two.
  • Taxes borne by a company are those that represent a cost to the company and are reflected in its financial results, e.g. corporation tax, employer NIC and business rates, etc.
  • Taxes collected are those which are generated by a company’s operations, and are not a tax liability of the company, e.g. income tax deducted under PAYE and net VAT, etc. The company generates the commercial activity that gives rise to the taxes and then collects and administers them on behalf of HMRC.

by Andrew Packman Total Tax Contribution and Tax Transparency leader, PwC United Kingdom

Email +44 (0)189 552 2104

by Janet Kerr Senior Manager, PwC United Kingdom

Email +44 (0)7841 781417