**7. Conclusions**

This review of the composition and trend in UK tax revenues has provided an insight into a complex system of different taxes. In the UK there are a multitude of different taxes at national level. Given such a number of different taxes looking at the revenues derived from each is important for prioritization, both from the perspective of budget planning and for analysis of the likely macro-economic impact.

In terms of overall taxation relative to GDP the UK is neither a particularly heavily taxed economy nor is it particularly lightly taxed. For the sample of countries used in **Figure 3** the UK was about mid-range in terms of tax revenues as a percentage of GDP both in 1995 and 2014. The share of tax in GDP in the UK has remained relatively stable at approximately 30%.

UK tax revenues in 2015–2016 were dominated by three taxes—personal income tax (32% of total receipts), VAT (22% of the total) and NICs (21%). These three taxes jointly accounted for ¾ of all tax revenues in that year. The composition of UK tax revenues has also tended to be stable over time. For example, the share of the three most important taxes in 2008–2009 was also a little over three quarters of the total.

In comparison to other countries UK tax revenues have a degree of similarity to the US and to France, where personal income tax, social security contributions and taxes on goods and services also dominate revenues. The source of revenues for Malaysia, where revenues are dominated by taxes on corporate income, are very different to those for the UK. Argentina is different again in that revenues from personal income tax only account for a small share of the total, with taxes on goods and services accounting for about 50% of revenues.

To further examine trends in the UK tax revenues this study examined monthly tax receipts for these three most important taxes. Monthly receipts show significant fluctuations over time so we fitted an econometric trend to these data, having first converted them to constant price terms. For all of the three main taxes the trend (in constant price terms) has been for the real value of tax revenues to increase in a slow but steady way. That is, the increase in the real value of tax revenues has more or less kept pace with growth in real GDP.

The literature on budgetary forecasting (including tax revenues) provides evidence of potential political bias in the forecasts of many countries. In the UK tax revenue forecasts are provided by the independent Office for Budget Responsibility (OBR). The OBR publish not only revenue forecasts at the level of individual taxes but also retrospective information on the sources of error in past forecasts.

Finally, the study included an examination of revenues collected in England by local government from the two main local taxes—council tax and non-domestic rates. Revenues from each of these taxes have remained stable in relation to national tax revenues. Each tax has yielded receipts roughly equivalent to 5% of national tax revenues for a period of years.
