Mind the gap
Paul Johnson
© Institute for Fiscal Studies
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
% of national income
Tax and spending 1997-2020
48
46
44
42
40
38
36
34
32
30
© Institute for Fiscal Studies
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
% of national income
Tax and spending 1997-2020
48
46
44
42
40
38
36
34
32
30
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Tax receipts in 2015-16
6%
4%
5%
27%
Income tax
5%
NICS
VAT
Fuel duty
7%
Other indirect taxes
Corporation tax
Council tax
6%
Business rates
Capital taxes
Other taxes
4%
18%
18%
2020–21
2019–20
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
2011–12
2010–11
2009–10
2008–09
2007–08
Share of national income (2007–08 = 100)
Changing shares since 2007-08
120
110
100
90
Indirect taxes
80
70
60
50
2020–21
2019–20
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
2011–12
2010–11
2009–10
2008–09
2007–08
Share of national income (2007–08 = 100)
Changing shares since 2007-08
120
110
Indirect taxes
100
90
Property taxes
80
70
Personal income taxes
60
50
2020–21
2019–20
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
2011–12
2010–11
2009–10
2008–09
2007–08
Share of national income (2007–08 = 100)
Changing shares since 2007-08
120
110
Indirect taxes
100
Capital taxes
90
80
Property taxes
70
Personal income taxes
60
50
2020–21
2019–20
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
2011–12
2010–11
2009–10
2008–09
2007–08
Share of national income (2007–08 = 100)
Changing shares since 2007-08
120
110
Indirect taxes
100
Capital taxes
90
Property taxes
80
Personal income taxes
70
Corporation taxes
60
50
Recession
Corporation taxes
2020-21
2018-19
2016-17
2014–15
2012–13
2010–11
2008–09
2006–07
2004–05
2002–03
2000–01
1998–99
1996–97
1994–95
1992–93
1990–91
1988–89
1986–87
1984–85
1982–83
1980–81
1978–79
% of national income
Corporation tax revenues – finally on a declining
trend?
6%
5%
4%
3%
2%
1%
0%
2020–21
2014–15
2013–14
2012–13
2011–12
2010–11
2009–10
2008–09
2007–08
2006–07
2005–06
% of national income
The role of banks
0.6%
0.5%
0.4%
0.3%
Bank surcharge
Bank levy
0.2%
Corporation tax
0.1%
0.0%
North Sea oil revenue projections
14
12
£bn, current prices
10
8
June Budget 2010
6
4
2
Budget 2011
0
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2020-21
2019-20
2018-19
2017-18
2016-17
2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
-2
North Sea oil revenue projections
14
12
£bn, current prices
10
June Budget 2010
8
Budget 2011
6
Budget 2012
4
Budget 2013
Budget 2014
2
Budget 2015
0
Budget 2016
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2020-21
2019-20
2018-19
2017-18
2016-17
2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
-2
Growing dependence on the very rich
100
90
70
60
50
Top 1%
40
90th–99th percentiles
50th–90th percentiles
30
20
10
2015–16
2010–11
2007–08
2000–01
1990–91
0
1978–79
% of income tax receipts
80
Policy risk
• £8 billion cost of increasing personal allowance and higher rate
threshold as promised in manifesto
• OBR assumes fuel duties rise with inflation
– Failure to do that this year makes that look unlikely
• Other thresholds frozen in cash terms
– 40% more additional rate taxpayers since April 2010
– 50% increase over next five years in numbers losing child benefit
• Increasing reliance on small and new taxes increases complexity
– Over £7bn in entirely new taxes by 2020
• DPT, bank tax, apprenticeship levy, sugar tax
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Economic risk
• £260 billion of income tax and NI receipts, highly sensitive to
earnings growth
– Recent combination of high employment and low earnings growth
has hit revenues hard
• Specific risks to
– Stamp duties – depending on the housing market
– Capital taxes – depending on the stock market
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Big choices
• What is the strategy for fuel taxes?
• Are we in new equilibrium with lower CT revenues?
• What risks does reliance on the very rich bring?
• Will reluctance to increase major taxes continue to lead to more
and more smaller taxes
– And associated complexity
• Is tax and spending at 37% of national income sustainable into the
long term?