Business in the UK continue to contribute significantly towards government revenues. CBI analysis of data published by the Office for National Statistics indicates that businesses in the UK paid £196bn in taxes in 2018/19.
Employer NICs and corporation tax together make up almost two thirds of the total taxes businesses pay, representing over £120bn in tax receipts for the Government. Following closely behind is business rates, accounting for 14% of total taxes paid by business.
On top of the traditional business taxes, business also pay a whole suite of “other” taxes. Together these smaller taxes make up £33bn and a significant 17% of all taxes business pays. Tax receipts from capital gains tax and Insurance Premium Tax make up almost half of this category, with the remaining half coming from over 20 additional business taxes including environmental taxes, the bank levy and new taxes such as the apprenticeship levy and the soft drinks industrial levy. The introduction of new taxes only adds to the already high cumulative burden faced by business.
Furthermore, this “other” category is getting larger indicating that businesses are being faced with more and more taxes to pay each year. Business paid 6% more in other business taxes compared to last year, outstripping growth in overall tax revenues (5%) and business taxes (4%).
Overall, all business taxes saw an increase relative to last year. What is noticeable is that despite subdued economic growth and cuts to the corporate tax rate, corporation tax receipts have been increasing, a trend we have seen over the past decade. Since last year, corporation tax receipts have increased by almost 5%.
Official data from the ONS indicates that profits of private non-financial corporations have increased over the same period, indicating that the tax base could be wider. There could be several reasons for this including a higher number of firms coming to the UK and anti-avoidance measures such as BEPS. In addition, there have been several policy changes that have led to a broadening of the tax base by expanding the scope of profits that are subject to corporation tax. Together, these two factors could help explain why we are seeing an increase in corporation tax receipts in the current economic climate.