A PwC study of taxes paid by 100 Group companies shows they contributed over £2bn more than last year, excedding any year since the research was first published in 2005.

The £2bn increase on 2013 has been driven mainly by higher employment and wages.  Employee numbers rose by 1.2% to over 2m, and their wages by 4.3% to average £31,000, increasing income taxes generated.  Greater VAT on sales also played a role, partly reflecting higher turnover in some firms.

However, corporation tax payments declined 7.4% in the last year, driven largely by lower tax receipts from the North Sea companies resulting from lower oil prices, high operating costs and high capital investment.

PwC’s analysis shows that if the oil and gas companies are taken out of the calculation, corporation tax increased by 6.7% and other business taxes borne increased by 6.2%.

Despite the decline in the amount of corporation tax paid over the year, PwC saysthat overall taxes paid by business have held up, with a 0.1% increase on last year. However, there continue to be changes in how the tax cost is made up.

For every £1 of corporation tax paid, 100 Group firms now contribute £3.27 in other taxes such as employers’ national insurance (NICs) and business rates. The ratio was equal when the survey began in 2005; last year it was 1: 2.86.  

Kevin Nicholson, head of tax at PwC, said: ‘Government policy of reducing corporation tax to make the UK open for business appears to be paying off.   But governments need to watch the impact on different industries as other taxes become more significant.  The changing composition of tax costs will affect some industries disproportionately.’

The report shows employer’s NICs, business rates, irrecoverable VAT and the bank levy, have continued to become a more significant part of the tax mix – with increases in the amount borne this year.

Nicholson said recent government policies also appear to be affecting employment tax receipts, with the tax per employee down £51 on last year to £11,214. This may reflect the higher personal allowance threshold affecting firms with a greater proportion of lower paid workers.  However, overall the employment tax generated by big firms has increased, as they took on more employees.   

The analysis also highlights the wider economic contribution of 100 Group firms.  Aside from employment, the companies spent £29bn on capital investment and £8bn on research and development in 2014.

Speaking at the launch of the PwC report for the 100 Group, David Gauke, financial secretary to the Treasury said: ‘First, we know the burden borne by business goes beyond corporation tax, and differs from sector to sector. The tax contribution report illustrates this very well, and it is something we are alive to as a government.

‘But we are committed to listening to businesses, hearing what works, what doesn’t, and having a conversation about how we can become even more competitive.’

He added: ‘The report shows how your tax contributions roughly mirror the trajectory of the economy. So although we are making good progress, we should not forget that the economy has only just recovered to pre-crisis levels.’

Gauke also referenced the need for global tax reform to create a fairer tax landscape. ‘The UK government wants an international system with fair rules that ensures all companies pay their share – a system where it isn’t possible for a company to play one country off against another so it pays barely any corporation tax at all,’ he said.

‘Delivering this requires action at an international level. We agree. That’s why we’ve taken a lead role so far on the international stage through the Base Erosion and Profit Shifting – or BEPS – project. So I am pleased with the way BEPS is progressing – it’s an important step towards a fairer and fitter international tax system.’