A recent report by The National Audit Office (NAO), an independent body that scrutinises public spending for Parliament, has revealed a tax structure in Wales tells a story of disproportionate contributions, with high earners and the executive market contributing a significant portion of the tax burden.

NAO helps parliament hold government to account and its insights are designed to help people who manage and govern public bodies and improve public services.

The report clearly demonstrates the value of high earners and business ownership in Wales and sends a clear message to first minister nominees that business and entrepreneurship really should have a stronger voice in Wales.

The distribution of tax contributions not only demonstrates the financial dependency of Welsh public services on high earners but also accentuates the pivotal role of the business community in the region's economic framework.

Key to growth is fostering SME growth by establishing robust transport networks and infrastructure, streamlining planning processes, drawing in businesses through inward investment, supporting innovation and the development of net-zero technologies. Such measures would undoubtedly pave the way for greater economic prosperity and in turn additional taxation income.

In Wales, we have 1.4 million taxpayers, representing 55% of the adult population, with the average tax paid per taxpayer amounting to approximately £1,700 annually. This collective contribution totals £2.4 billion, highlighting the revenue generated from income tax in the principality.

A deeper dive into the numbers reveals a stark disparity in tax contributions among different income groups. 8.5% of taxpayers in Wales, roughly 119,000 individuals, fall into the higher tax rate bracket, earning above £50,200 annually. Despite their relatively small numbers, these higher-rate taxpayers contribute a staggering 42% of the total tax revenue.

This figure underscores the significant financial contribution by those in the higher income bracket.

The disparity becomes even more pronounced at the pinnacle of the income pyramid. A mere 0.4% of Welsh taxpayers, or approximately 5,600 individuals, pay the additional rate for those earning above £125,000 annually. This small cohort contributes 10.1% of the total tax revenue, further illustrating the skewed distribution of tax contributions in Wales.

Cumulatively, these statistics reveal that around 125,000 people, combining higher and additional rate taxpayers, pay 52% of the total tax, equating to £1.25 billion.

This concentration of tax contributions among a relatively small segment of the population raises important questions about the equity and sustainability of the current tax system.

The implications of such a tax structure are multifaceted. On one hand, it highlights the reliance of Welsh public finances on a small, high-earning segment of the population. On the other, it underscores the importance of the executive and of the business sector in Wales.

As Wales continues to navigate the complexities of its tax system, these figures prompt a broader conversation about tax policy, economic equity, and the principles that should guide the distribution of tax.

Ensuring that the tax system is fair, progressive, and sustainable is crucial for the long-term economic health and social cohesion of Wales.

To read a full copy of the report – Administration of Welsh rates of income tax 2022-23 – Summary (nao.org.uk)