Welsh and Northern Irish pay quarter less tax than English

People living in Wales and Northern Ireland pay about a quarter less tax than people living in England, according to official figures that highlight the big differentials in wealth and income throughout the UK.

In the first breakdown of tax revenues raised in different parts of the UK, HM Revenue & Customs also produced estimates of the yield from Scotland’s share of tax revenues from companies and North Sea production that were at least 12 per cent lower than similar estimates produced by the Scottish government.

HMRC calculated that the main taxes on earnings, savings and profits all yielded at least 25 per cent less revenue per person in both Wales and Northern Ireland than in the UK as a whole.

But Northern Ireland provided 18 per cent – or £76 per year – more revenue from fuel duties per person and 79 per cent – or £120 per year – more tobacco duty than the UK as a whole. Value added tax revenues in Northern Ireland were only slightly lower than in the UK as a whole.

The Institute for Fiscal Studies, the independent think tank, said: “This is the first time that most sources of revenue have been broken down to show the amount raised in Wales and Northern Ireland separately and what is particularly striking about these estimates is how much lower taxes per person in these areas are than in England or Scotland.”

Tax revenues in Scotland were estimated to be £7,100 per person in 2012–13, not much less than in the UK as a whole. Scots paid £290 per year less in income tax on average, which the IFS said was partly because incomes in Scotland were more equally distributed, with fewer of the very high-income individuals who provided a large share of income tax revenue in the UK as a whole. But Scots contributed slightly more in VAT and in alcohol and tobacco taxes.

The Scottish government already produces estimates of Scottish tax revenues, unlike for Wales and Northern Ireland. The HMRC figures differed from the Scottish government on onshore corporation tax where they were 15 per cent, or £400m lower. The Scottish government estimate for 2011–12 was £3bn, while the HMRC estimate was £2.5bn. The IFS said: “Neither of these estimates is clearly superior to the other, and both may be some way off.”

The HMRC estimates were also 12 per cent, or £1.3bn lower on taxes on North Sea production than the Scottish government’s estimates, using a method that divided revenues on a geographical basis according to the location of individual oil and gasfields. On this basis, the Scottish government estimated Scotland’s share in 2011–12 at 94 per cent or £10.6bn, while HMRC’s estimate was 83 per cent or £9.3bn. This disparity stemmed from differences in their models of how much taxable profit arises from different fields, the IFS said.

HMRC’s figures also differed from the Scottish government in the yield on stamp duty on shares, where they were 40 per cent, or £100m lower. The IFS said the HMRC figures, which were based on companies’ registered addresses, were the better guide.

Tax revenues per person in 2012-13 were 26 per cent lower in Wales and 23 per cent lower in Northern Ireland than in the UK as a whole in 2012-13. In the UK, they totalled £7,300 while in Wales they averaged £5,400 and in Northern Ireland they averaged £5,700. The figures excluded the impact of North Sea oil and gas. They also did not include revenue not collected by HMRC, such as council tax, business rates and vehicle excise duty.