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How much tax does big business actually pay?

by Tax Faculty Team on 27.01.2013 16:13

PwC launches its latest Total Tax Contribution survey

PwC has just published its latest, 2012, survey of the various taxes paid and collected by the 100 Group of Companies (which are drawn largely from the FTSE 100).

The report is
Total Tax Contribution – Surveying the Hundred Group.

The surveys have been carried out each year since 2005 so there is now a considerable amount of evidence as to how the UK tax system has changed over the period and of the contribution that these companies continue to make to the public finances.

This is particularly interesting at the present time when there has been a high profile debate, particularly in the UK, as to whether the largest companies are making an appropriate contribution to those public finances.

On the evidence put forward in this latest survey the answer seems to be an unequivocal yes. It is also helpful to have data on the whole range of taxes that business pays and not merely tax on profits, corporation tax, which is the part of their contribution that has been in the public spotlight in recent months.

The survey shows that in 2012 the companies surveyed paid £25bn in taxes and in addition collected £52bn on behalf of Government. The combined total, £77bn, which is more or less unchanged from the previous year, represents more than 14% of the total taxes collected by Government.

An interesting change since 2005 is that while back in those days corporation tax, tax on company profits, represent 50% of total taxes paid that has now, in 2012, come down to one-third. This reflects the reduction in the headline rate of tax over the period and this trend will continue as the headline rate comes down further to 21% from April 2014. The other major taxes paid by business are employers’ National Insurance Contributions, business rates and irrecoverable VAT.

For the first time the survey has looked more widely at the contribution that these very large businesses make to the general economy and they spent £19bn on capital expenditure and £2.5bn on research and development: key areas if the UK is to develop and maintain its competitive advantage.

This survey continues to be a helpful and positive contribution to the public debate about the role that business plays in the public finances. The survey respondents were asked about future tax policy and one of their key requests was for a period of stability and less change to the tax system. After a number of years of radical change to the corporate tax system, to seek to make it "the most competitive tax system amongst the G20 countries", there is now the need for some stability on the domestic tax front.