- Tax burden could be shifted onto earnings and company profits – impacting competitiveness
HMRC receipts from so-called ‘sin taxes’ on tobacco, alcohol, gambling and sugary drinks fell once again last year to just 3.1% of total tax receipts*, says national accountancy group UHY Hacker Young.
‘Sin taxes’ as a percentage of total HMRC receipts have been in steady decline over the last decade – with ‘sin tax’ receipts plateauing while total tax receipts have risen. In 2013/14, ‘sin taxes’ made up 4.5% of total tax receipts – this declined to 3.1% of total tax receipts in the most recent data (see table below).
Whilst total tax receipts have risen by 61.4% over the last decade (from £503bn in 2013/14 to 812.6bn in 2022/23), ‘sin tax’ receipts only increased by 14% (£22.1bn in 2013/14 to £25.2bn in 2022/23). With inflation estimated at 32% in the period up to October 2023, the total ‘sin tax’ take has fallen in real terms.
With the total proportion of tax revenue made up from ‘sin taxes’ falling, the government has been forced to look for alternate sources of tax revenue. This has meant increasing the tax burden on individuals’ earnings (through income tax) and on company profits (through corporation tax).
Nikhil Oza, Partner at UHY Hacker Young, says: “The falling proportion of sin tax revenues raises the question of how the government will make it up elsewhere. If the burden ends up being shifted onto further taxation on earnings and company profits, this could negatively impact the competitiveness of businesses in the UK”.
As consumer lifestyle trends change and people are increasingly opting for healthier habits, receipts from ‘sin taxes’ could continue to drop as a share of total receipts. The proportion of those aged 16 and over who consume alcohol has declined from 52% in 2015 to 48% in 2019**. The proportion of adult smokers in the UK has fallen from 20.2% of the population in 2011 to just 12.9% in 2022***.
Says Nikhil Oza: “Alcohol and tobacco consumption have been trending downwards for decades, affecting the amount of money HMRC collects from these duties.”
“As the public becomes more health-conscious, we’re likely to see these consumption trends continue to decline.”
In the 2023 Autumn Statement, the Government announced a 10.1% increase in alcohol duties and 2% increase above inflation in tobacco duties. This is set to boost ‘sin tax’ receipts in the short term but may further discourage consumption of alcohol and tobacco in the long term.
Says Nikhil Oza: “The Government raised duties only a few months ago, but it’s unlikely to be enough to reverse the long-term decline in the overall ‘sin tax’ take.”
“HMRC is always looking to increase its tax take – with either new taxes or enhanced tax rates. The British public should brace themselves for further increases in duties on alcohol or tobacco – it looks like the price of a pint will keep growing.”
*Source: HMRC.
**Source: Drink Aware
***Source: ONS.
ENDS
About UHY Hacker Young:
The UHY Hacker Young Group is one of the UK’s leading accountancy networks with 96 partners and 720 professional staff working from 24 locations around the country. The offices within the Group provide a wide range of accounting, tax and business advisory services, with a reputation for integrity and reliability within the financial community, and particularly with London’s Stock Markets. UHY Hacker Young are also ranked 18th in the ARL Corporate Advisers Rankings Guide amongst other UK audit firms for advising AIM listed companies.
UHY Hacker Young is a founder member of the UHY International network with offices in every major financial centre in the world. Further information can be found at www.uhy-uk.com
Press contacts:
Zoe Paradine
National Executive Director
UHY Hacker Young
Tel: +44 20 7216 4643
Richard Crossan
Mattison Public Relations
Tel: +44 (0)20 7645 3646
Silas Hope
Mattison Public Relations
Tel: +44 (0)2076453636
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