CBI urges radical overhaul of business tax
The CBI has said the UK’s corporate tax system needs a major revamp in order to compete on a global level. In its published report, the CBI’s independent Tax Task Force, comprising 12 leading tax experts, has produced a long-term vision for the UK business tax system. The report argued that the rising business tax burden and the inability of the tax system to react to global business activity mean that the current regime is effectively unsustainable. From having one of the most favourable corporate tax regimes in the world, the UK was in danger of losing out to other countries where business tax had undergone fundamental changes, the CBI argued. The Task Force’s main recommendation is a reduction in the headline rate of Corporation Tax from 28 per cent to 18 per cent over the next eight years. Although the reduction would see a fall in government revenue of between £0.3 billion and £4.2 billion in each of the first seven years of the reform, the CBI claimed that government income would be boosted by an average of £15.6 billion each year from years eight to 12. Among its other proposals, the report presented the case for tax calculated on the basis of existing company accounts, scrapping the current system where firms have to maintain two sets of books. More time should be given for proper consultation on tax proposals, too, with better resourced and effective parliamentary scrutiny, and limited budget secrecy. The CBI also argued for the establishment of a non-political, independent tax law commission to monitor and review existing tax law and suggest improvements. Meanwhile the tax system for SMEs should be simplified to stimulate the growth of smaller businesses, with an exemption from rules intended for multinationals, a small firms corporation tax rate brought back to 18 per cent within three years and the SME investment allowance doubled to £100,000. 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. “An 18 per cent business rate within eight years would help restore the UK’s low tax credentials. But a radical shake-up is also vital if clarity, certainty and simplicity are to be reintroduced to the system so firms can plan with confidence and make Britain their long-term home.” Mr Lambert criticised the “the to-ing and fro-ing over CGT and non-doms in recent months”, saying that “knee-jerk, retrospective change is no way to manage a tax system”. He concluded: “The UK government should clear away the thick layer of silt that has built up over time in our tax system. “It needs to have the confidence to permit a serious, non-political, dialogue about where the business tax regime should be heading, what it needs to achieve, and what we want it to look like in ten years time.” However, the TUC attacked the report, claiming it would lead to tax hikes for ordinary people and damaging cuts to public services. Date:10 March 2008
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