Tax Collections Down in the UK

August 23, 2012 Taxation in UK

Collection of taxes in the UKLONDON – The UK has seen an unexpected drop in tax collections over the month of July, forcing the government to increase borrowing in order to cover the new budgetary shortfall.

On August 22nd the UK Office for National Statistics released a report showing that tax collections in the UK over the month of July fell by 0.8 percent, compared to the same period last year.

According to the Office, the overall drop can be primarily attributed to a 19.3 percent reduction in the collections of corporate income taxes over the month of July, compared to the same period last year.

The negative effects from the fall in tax collections was exasperated by a 5.1 percent increase in government spending, leading to a overall budget shortfall of GBP 557 million for the month.

The Office noted that the month of July is typically a strong time for tax collections in the UK, and this year was only the third instance since 1997 that the UK had not recorded a budgetary surplus in July.

In order to cover the budget deficit for the month, the government was forced to increase borrowing by approximately GBP 600 million, compared to July 2011 when the government saw a budgetary surplus of approximately GBP 2.8 billion.

The reduced tax collections have already led some analysts and politicians to criticize the policies put foward by the Chancellor of the Exchequer, claiming that the current austerity measures and economic policies in the UK are not aiding the country but are only serving to slow down economic growth.

The cumulative public debt of the UK has now reached GBP 1 032 billion, approximately 65.7 percent of GDP.

Photo by Images_of_Money