With the government launching a range of consultations on the future of the UK’s tax system under its Tax Administration Framework Review, including on basis period reform, ICAEW took a step back and assessed not just where UK tax is heading, but also how it’s progressed over the past 54 years. This is presented in the form of the ICAEW Tax Race, which reveals how much the government has collected from different taxes since 1965.
How does the ICAEW Tax Race work?
You will be greeted by a bar chart that presents the tax take for eight different taxes in 1965. This is the starting line. To start the race, click the play button in the bottom left-hand corner. The race will begin and taxes will switch positions based on their relative sizes over the years. Once the race is run, the bar chart will stop at 2019 (the finishing line) so you can see what place each tax will take on the podium.
- You can look at the tax takes for a specific year by clicking the year button on the X-axis.
- You can play the Tax Race starting from any year you choose by clicking on the respective year along the X-axis. Once you have selected your starting year, press the start button and the Tax Race will start from the chosen year all the way to the end.
- You can remove and re-add any tax in the Tax Race by clicking on a selected tax in the top half section labelled “Tax type”. Once you have the selection you want (choosing from the eight that are available) you can race just the taxes you wish to see, with the others dropped out of the running.
Why this selection of taxes?
These taxes were selected to give a broad overview of how the UK government’s tax receipts are broken down. Each tax has a minimum amount of £5bn over the 54-year period to make sure there isn’t too much of a gap and places can switch over the course of the Tax Race.
Dating as far back as the mid-1960s, some taxes went by different names or have been replaced, we have put these together in the race across the five decades where appropriate. For example, we have combined Purchase Tax on sales to consumers up until 1974 with the Value Added Tax (VAT) that replaced it.
Various other smaller taxes, eg, stamp duty and stamp duty land tax, have been excluded from our Tax Race as receipts from them were too low to show up on the chart.
Expert comment: Customs and excise down, VAT up
The amounts used in the Tax Race have been sourced from OECD’s Details of Tax Revenue – United Kingdom table. We would like to thank Peter Bickley, ICAEW Tax Faculty Technical Manager and Martin Wheatcroft, external advisor on public finances to ICAEW for their help in putting the Tax Race together.
Wheatcroft comments: “The chart shows vividly how customs and excise duties’ share of the tax take have declined over time. At the same time, VAT has become the second most important contributor to the exchequer after income tax and ahead of National Insurance. The challenge for policymakers considering how to extract more from us to pay the government’s bills is how dependent they are on those three largest taxes to provide the bulk of the money needed for public services.”
Bickley comments: “Income tax has always been the UK’s biggest tax hitter but VAT has proved to be the rabbit in the hat, replacing customs and excise duties as the silver medal winner. NIC is another major contender, which having moved to silver is now back to where it started in third place. It is interesting that customs and excise duties has consistently lost ground and is now in the midfield alongside rates and council tax and corporate taxes, and individual capital taxes, which cause the greatest pain when applicable, have consistently trailed the pack in terms of exchequer take.”
ICAEW has invited economists and tax professionals from accountancy firms to share their thoughts on the performance of UK taxes over the past five decades, also offering insight into what the data could foreshadow as the 2021 Budget approaches. Members should expect to see these articles published next week
Anyone with queries relating to this document can email firstname.lastname@example.org
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