CBI calls for overhaul in UK tax system

Source: Exec Digital UK

Date :10/03/2008 09:12:13

A radical overhaul of the UK's corporate tax system is needed urgently if the country is to regain its status as an internationally competitive location, a new report by the CBI has said.

The report, 'UK business tax: a compelling case for change', reveals that the UK has now reached a ‘tipping point’.

“The ever rising business tax burden and the failure of the tax system to respond to increasingly global business activity is creating a corporate tax system which is unsustainable in the long-term,” the Confederation of British Industry (CBI) said.

Tax Task Force

Chaired by GE Capital Europe's President, Charles Alexander the CBI's independent Tax Task Force - consisting of twelve leading tax experts in the UK - has spent nine months collating intelligence and conducting detailed international research to produce a long-term vision for the UK tax system.

With Chancellor Alistair Darling due to give his first Budget on Wednesday, the CBI wants corporation tax cut from 28 percent to 18 percent by 2016 and a simpler system.

Richard Lambert, the CBI's Director-General, said: "Our traditional tax system is no longer fit for purpose and is making the UK look increasingly uncompetitive. We need bold action to restore a competitive headline rate of corporate tax.

"We have all seen the to-ing and fro-ing over CGT and non-doms in recent months. Knee-jerk, retrospective change is no way to manage a tax system, he said.

Corporation tax

According to the report, the UK has failed to match deep cuts made to corporation tax by nations like Italy and the Netherlands.

It says since 1993 the main rate of UK corporation tax has been reduced by five percent to 28 percent, but Germany has halved its tax rate to 29.8 percent and the Netherlands has sliced off 9.5 percent, to 25.5 percent.

That means that the UK has slipped from fourth to sixth place in the ranking of EU nations with the lowest corporation tax rates.

Charles Alexander, Chairman of the CBI Tax Task Force and President of GE Capital Europe said: "You don't have to be a tax expert to work out that every penny spent on tax leaves less available for investment in jobs, research and development. So an uncompetitive tax system affects everyone.

"No-one wants to see the UK lose its edge and it would be tragic if an uncompetitive tax regime was allowed to undermine the other attractive features that make Britain a good place to live, work and do business.

March 10, 2008