The UK’s biggest companies made a total tax contribution of £80.5bn this year, and are paying higher rates of tax than previously despite the continued reduction in the corporation tax rate, according to analysis by PwC for the 100 Group of finance directors which suggests property and employment taxes are becoming more significant
The 2015 Total Tax Contribution survey shows that the total tax rate, which is a measure of the total tax cost compared to profit, now stands at 42.9%, up from 41.4 % in 2014 and 38.2% in 2008.
This year’s £80.5bn total tax contribution is made up £22.9bn in taxes borne and £57.6 bn in taxes collected. The figure is only slightly higher than last year’s total of £80bn, but was achieved despite falling profitability in the oil and gas and retail sectors.
The survey shows business rates have overtaken corporation tax for the first time to become the second largest tax borne by these large companies.
Business rates now make up 21% of tax bills, behind employers’ national insurance contributions (NIC) at 29.4 %. Corporation tax makes up the third largest tax share at 18.3%, compared with 23.4% last year.
PwC’s calculations show that for every £1 of corporation tax, businesses now pay £4.46 in other taxes – up a significant £1.19 on last year. In 2005 the ratio was 1:1.
Kevin Nicholson, head of tax at PwC, said: ‘Successive governments have deliberately reduced reliance on volatile profit taxes by taxing businesses in other ways. Four fifths of business tax costs now come from taxes that many people may not have heard about and the new apprenticeship levy will further increase the contribution from large business.
'There needs to be transparency on all the taxes businesses pay and how they impact particular industries.’
The study shows there is now increased variation in tax costs for different industries. PwC says irrecoverable VAT has risen by 121% since 2005. Over the same period, business rates have risen by 86%, driven by a number of factors including increased rateable values.
Over half of the taxes borne by retailers relate to business rates, while over a third of taxes borne by financial services companies relates to irrecoverable VAT.
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