A Price Waterhouse Cooper study has suggested that tax cuts may be boosting the amount of public revenue derived from business. The study showed a significant increase in yield for the influiential100 Group of finance directors from tax cuts.

Taxes borne and collected by 100 Group companies totalled £80bn in 2014, up £2bn on the previous year, and surpassed any year since in the decade since the study began.

The increase on 2013 was driven mainly by higher employment and wages, PwC said. Employee numbers rose by 1.2% to more than two million, while wages rose by 4.3% to average £31.9k, thus meaning an increase income taxes generated. Greater VAT on sales has also led to the record tax contribution, in some parts reflecting higher turnover in some firms.

The report also highlighted the shift from direct taxes to indirect levies such as VAT. In 2005 almost 50% of all the tax borne by companies was accounted for by corporation tax – about a one to one ratio. However, in 2014 for every £1 paid in corporation tax £3.27 was paid in other taxes.
Contributions from business rates have increased by 78% since 2005, driven mainly by increasing rateable property values and growth in the retail sector.

In the tax year to April 2014, the corporation tax yield fell primarily due to the lower level of receipts collected receipts from North Sea oil companies. Greater capital investment, significant operating costs and a fall in oil prices were the principal causes. Taking oil & gas companies away from the equation, corporation tax increased by 6.7% and other business taxes borne increased by 6.2%.

Corporation tax has been cut to 21% and is due to be cut again to 20% in April next year. National insurance contributions have however risen despite the tax-free allowance being raised to £12,500.