The total tax contribution by the largest companies in the UK

The 13th PwC survey results are published 

For the past thirteen years PwC has carried out an analysis, on behalf of the 100 Group, of the total UK tax contribution of the members of the 100 Group. These are the largest companies in the UK and are the most significant contributors to the UK public finances. 

The total tax contribution covers the taxes that companies bear, or pay out of their own resources, such as corporation tax, employers’ NIC contributions, business rates and irrecoverable VAT but the analysis also covers the taxes the companies collect on behalf of government such as fuel duties, PAYE and VAT. 

Taxes borne

In the year to 31 March 2017 the total taxes borne were £25.3bn. The top tax borne continues to be Employers’ NIC which represented 27.3% of the total. This is followed by corporate income tax at 25.2% and then business rates at 18.9%. Corporate income tax increased from less than 20% in the previous year in the main because of the extra corporate taxes paid by the banks.   

This means that for every £1 which the largest companies pay in corporate income tax they pay nearly £3 in other taxes. 

When the first study was carried out corporate income tax represented 50% of the taxes borne by the largest businesses i.e. ten years ago for every £1 the companies paid in corporate income tax they paid just £1 in other taxes. 

Taxes borne and collected

Total taxes borne, and collected, by these companies was £82.9bn which represents 12.6% of total government receipts, down somewhat from  2016 (13.3%). 

Is large business paying its fair share of tax?

A major criticism of large, international, business is that it manipulates domestic, and international, tax rules to pay less tax that it should: it is accused of not “paying the right amount of tax”. 

We have looked back to the very first PwC studies and in those the taxes borne by these businesses, the taxes they pay out of their own pockets, rather than the taxes collected on behalf of government, were 4.3% of total tax receipts. In the two most recent years, to 31 March 2016 and 2017, that percentage has come down to 3.8%. 

On the face of it, it would appear that the largest businesses are continuing to make a comparable, albeit slightly smaller, contribution to the public finances by comparison with the contribution they made ten plus years ago.

This year for the first time the GVA (Gross Value Added) figures have been provided for each employee, £66,000. These companies employ 2.1m people which adds up to GVA of just under £140bn. If you compare that with total GDP of nearly £2tn that represents nearly 7% of UK GVA. Compare that with the total taxes borne and collected by the 100 Group, which represent 12.6% of total government receipts then the fiscal contribution of the 100 Group is much greater than its economic size in the UK economy.

The numbers in 2017 and a continuing change in the sectoral balance

Corporate income tax is the tax that gets all the public attention but it now represents only about 25p in each £ that the very largest UK companies pay compared with 50p when the first survey was published in 2005.

Employers’ NIC overtook corporate income tax a few years ago as the most significant tax borne by large business but it is now only about 10% greater than corporate income tax whereas it was 60% more in 2016. Business rates have now become the third most significant tax for large business.  

The survey also covers the taxes collected by large business and together with taxes borne the total this year comes, as noted above, to £82.9bn which is the highest ever amount and back to, pre-recession, 2007 levels.

The wider economic impact of the 100 Group

For the past few years the survey has also looked at other contributions to the UK economy by the 100 Group companies. These companies employ 2.1m people which represents 6.5% of the UK workforce with an average wage of £34,266. The 100 Group also invests £9.3bn in Research and Development compared with just under £6bn a few years previously. This is nearly 30% of the total UK spend on R&D. The companies that participated in the study invested £26.6bn in tangible fixed assets which is 14.5% of UK expenditure on business capital investment.