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Huge increase in UK tax burden

Friday 14th June 2013

The tax burden on Britain’s largest retailers has increased 65% since 2005, a new PwC report shows.

Retailers are feeling the impact of the shift in business taxes towards indirect taxes and business rates (taxes that hit their profits). The retailers in the Hundred Group now have a total tax rate of 59%, compared with an average of 39% across all industries in the Hundred Group.

Despite the Government reducing the corporation tax rate, payments of corporation tax by these retailers have increased 11% over the period while other business taxes including business rates and employers national insurance contributions have increased by almost 80% since 2005.

Data analysed by PwC across the UK retail sector as a whole support these findings. The most recent data on business rate contributions shows these have increased by over 30% between 2008 and 2010. After a fall of 14% from 2007, retail corporation tax payments increased by over 6% from 2008 to 2012.

Mary Monfries, head of tax policy at PwC, said: "Governments looking for stable tax revenues have rebalanced business taxes so there is less reliance on corporation tax, which is inevitably volatile as it is dependent on profits. For every £1 of corporation tax, the UK’s largest retailers now pay almost £2.40 in other taxes out of their profits. The rise in business rates in particular is felt by retailers given their large property portfolios."

The increasing tax burden has come in tandem with challenging conditions for retailers, with the volume of retail sales in March 2013 only 2.0% higher than in March 2008.

Christine Cross, chief retail adviser to PwC, said: "Retail in the UK not only gives domestic employment, but also stimulates consumer confidence and makes a significant contribution to the public purse. However, high business rates represent a significant burden for those still trying to balance physical stores with online retail."

According to PwC’s study, the total value added to the economy by the largest UK retailers was £22.4bn. Profits made by the retail companies account for 20% of this. These profits were either distributed to shareholders, including institutional investors such as pension funds, or retained by the companies for reinvestment. The larger proportion of the value distributed went to employees in wages (40%) and to government in taxes borne and collected (37%).

Other key findings:

* The retailers in the Hundred Group bore £3.99billion tax in 2012 (£3.86billion in 2011);
* Adding the taxes these companies collect such as PAYE, net VAT and employees’ NIC, the full tax contribution totals £8.28bn (£8.17bn in 2011);
* For every £1 of corporation tax, the UK’s largest retailers now bear almost £2.40 in other taxes of which £1.44 relates to business rates and £0.64 relates to employers national insurance contributions.

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George Bailey

              

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