Analysis published by the CBI in August showed that the overall business tax contribution in 2017/18 was £186 billion, which is more than is spent on the NHS each year. Additionally, the analysis showed that taxes paid by business have been increasing faster than other taxes, as until a few years ago, business tax, other taxes and total taxes were growing at a similar rate.
The analysis also revealed that corporation tax receipts have been increasing as a percentage of GDP despite corporation tax cuts and falling profits. However, corporation tax is just one part of the story.
Businesses also pay a suite of other taxes, such as fuel duties, energy taxes, national insurance contributions. Unlike corporation tax, some of these other taxes hit business’ before they make a profit which can be detrimental to those businesses requiring large investment. It is therefore critical to shine a light on the impact of these other taxes too. In the last few years a host of sector specific business taxes have also been introduced such as the bank levy, with other taxes such as IPT having seen a rate increase.
Increasingly it isn’t only taxes that are targeted at specific sectors/activities that lead to sectoral disparities, with some taxes by the nature of their design having differential impacts across sectors. Taxes such as business rates, energy taxes and fuel duties are not paid by all businesses and are highly dependent on the business model. The spotlight has recently been on the retail sector, where business rates add an extra burden on top of Corporation Tax and National Insurance Contributions. One retailer for example, cited their business rates bill to be double what they pay in corporation tax and nearly a quarter of their total tax contribution in the UK. In addition, a manufacturing firm will not only have to pay corporation tax and NICs, it is also likely to pay business rates, energy taxes and fuel duties.
Businesses make a vital contribution to society, ensuring funding for vital services and infrastructure that the UK relies. When thinking about the taxes businesses pay, it is critical to look at the full suite of business taxes, not just the headline Corporation Tax rate.
Going forward, the CBI will be using that analysis to set the backdrop for the CBI’s Tax in the Modern Economy campaign and the CBI’s Autumn Budget submission.