**4. Trends in UK tax revenues**

**Figure 4** plots monthly revenues from personal income tax between January 2002 and September 2016. These are measured in constant price terms, using the UK retail price index to adjust. To the extent that these tax revenues are dominated by income from employment it might be expected that monthly revenues would be fairly stable over time. In contrast, **Figure 4** shows that revenues from personal income exhibit a high degree of volatility over time To provide a clearer a trend was fitted by using a simple linear regression in Eviews7. The results of this estimated trend are also reported in **Figure 4**. This shows a slight and steady increase in the real value of revenues from personal income tax over the period.

**Figure 4.** Personal income tax revenues in constant prices (May 2014 = 100).

**Figure 5.** Monthly NIC revenues (constant prices).

**Figure 5** presents a similar analysis for National Insurance Contribution (NIC) revenues over the same period (January 2002–September 2016) in constant price terms. As with personal income tax monthly revenues exhibit considerable volatility. Again a trend was fitted using an OLS regression in Eviews7. The trend, as with personal income tax, shows a steady rise in the real value of NICs over the period.

**Figure 6** presents monthly data on VAT revenues from April 2008 until August 2016 (earlier data were not available). Yet again receipts show considerable volatility over time. As with both personal income tax and NICs OLS regression was used to construct a trend line. The trend, as with the other two taxes, has been for a steady but gradual increase in revenues from VAT.

Finally, **Figure 7** presents a similar graphical analysis for monthly UK tax revenues (measured in constant price terms) from the period April 2008–September 2016. As with the earlier charts a trend was estimated using OLS regression in Eviews7. Total tax revenues (as shown by the trend line) remain volatile from 1 month to another but the trend is almost constant in real terms, exhibiting a very slight and gradual increase over the period.

**Figure 4.** Personal income tax revenues in constant prices (May 2014 = 100).

In France the relative contribution of social security to overall tax revenues (37% in 2014) is close to double that of the UK (19% in 2014). The UK earns proportionately more from personal income tax, corporate income tax and from taxes on goods and services than does France.

The composition of Malaysian tax revenues is almost wholly different to that of the UK. In Malaysia in 2014 receipts from taxes on corporate income accounted for about 53% of total tax revenues. The comparable figure for the UK was just 7.5%. Social security contributions and property taxes account only for a minimal share of Malaysian tax revenues but represent a more significant share of overall UK revenues. Personal income tax in the UK is approximately double the share of tax revenues of that in Malaysia (14% compared to 27%

Argentina too has a fundamentally different composition of tax revenues than the UK. In the UK revenues from personal income tax represent the second largest share of overall receipts. In Argentina they accounted for less than 9% of the total, even less in earlier years. Taxes on goods and services are the dominant source of tax revenues for Argentina, accounting for almost 50% of total revenues. In the UK they are the single largest contributor but still account

**Figure 4** plots monthly revenues from personal income tax between January 2002 and September 2016. These are measured in constant price terms, using the UK retail price index to adjust. To the extent that these tax revenues are dominated by income from employment it might be expected that monthly revenues would be fairly stable over time. In contrast, **Figure 4** shows that revenues from personal income exhibit a high degree of volatility over time To provide a clearer a trend was fitted by using a simple linear regression in Eviews7. The results of this estimated trend are also reported in **Figure 4**. This shows a slight and steady increase in the real value of revenues from personal income tax over the period.

in 2014).

90 Taxes and Taxation Trends

for approximately one third of the total.

**4. Trends in UK tax revenues**

Schreger [9] studied government revenue and budget forecasts in Eurozone countries, finding lower bias in those countries that have adopted budget rules. Leal et al. [10] argue in favour of transparent methods in revenue forecasting combined with clear procedures. Jonung and Larch [11] analysed the link between policy and forecasts and considered how the policy framework might be reformed to reduce influence on revenue forecasts. They argue strongly that revenue forecasts should be conducted by an independent authority to reduce potential political bias. In the UK precisely such an independent authority exists. The *Office for Budget Responsibility* (OBR) was established by government in 2010. Its function is to provide independent analysis

UK Taxes and Tax Revenues: Composition and Trends http://dx.doi.org/10.5772/intechopen.74380 93

The OBR produces forecasts for overall revenues and also on a tax by tax basis. They use a variety of different modelling and forecasting techniques. A crude generalization would be that those taxes most closely related to economic behaviour such as personal income tax, NICs and VAT tend to be forecasted using a detailed structural of the economy. Other, smaller taxes, less obviously related to the business cycle are sometimes forecast by time series methods.

OBR reports do not just provide forecasts but also an evaluation of errors in past forecasts. A specimen of such an evaluation from the OBR's October 2016 report [12] is reproduced below

**Table 4** reports collections of the two main local taxes—council tax and non-domestic rates. The information is for England rather than the UK as a whole. Collections of both taxes are

of public finance. Specifically it has five main roles:

**Table 3.** Specimen OBR revenue forecast evaluation.

• To produce detailed 5 year forecasts twice per year

• Assessment of the sustainability of public finances

• Fiscal risk evaluation

(**Table 3**).

**6. Local taxes**

• Evaluation of government performance in relation to its fiscal targets

• Scrutiny of the costing of government tax and welfare measures

**Figure 7.** Total monthly tax revenues (in constant prices).

Taken overall, the figures for individual taxes and for overall tax revenues all share more or less common trends. That is, tax revenues in constant prices terms have tended to be stable over longer periods of time (the trend) but volatile between 1 month and another. The trend is for the real value of tax revenues to grow slowly and slightly i.
