Tax reductions needed to make economy competitive claims report
A RADICAL programme of business tax reductions needs to be introduced by the Government if the UK is to be tax competitive, a new report has claimed.
If the UK does not have a sufficiently attractive taxation system then a great deal of foreign investment is likely to head elsewhere, concludes the Institute of Directors in its annual report of the competitiveness of the UK tax system.
The report, published in conjunction with BDO, states that while the UK remains in the middle of the 34 OECD countries in terms of total tax burden, things will improve slightly when the main corporation tax rate reaches 23% in 2014.
However, it said a much more ambitious target – 15% by 2020 – would push the UK to the fore.
The UK is also in the middle of the pack on the total cost of employing people, taking into account not just income tax but employees’ and employers’ national insurance. If an employer wants to get a given amount of money into an average employee’s pocket, half as much again must be paid over to the state.
The 52% top income tax rate is also seen as a disincentive and one which gives a false impression of the UK.
On the administrative side, the report claims the UK does reasonably well in offering taxpayers certainty and keeping burdens down. However, there is still plenty of scope for improvement.
The report suggests a simpler, flatter taxation system would be better understood by both businesses and individual taxpayers. It said the pace of tax reforms and tax simplification should be accelerated within the framework of the necessary reduction in the fiscal deficit.
Richard Rose, partner and head of tax at BDO in the West Midlands, commented: “The vision we are promoting is based on the advantages for both businesses and individual taxpayers if the UK were to move in the direction of a flatter tax system, with lower tax rates but fewer overly targeted reliefs.
“The areas of tax law which we have highlighted show that progress can be made in the short to medium term which would be entirely consistent with the coalition Government’s stated objectives to reduce the fiscal deficit, but which would both create a more competitive tax regime and significantly simplify taxation.”
John Rider, regional chairman of the IoD West Midlands, said: “The UK should be the country of choice for international capital, and a place where the tax system is not so burdensome as to tilt the balance against enterprise and hard work. Our tax system is uninviting. It places the UK in the middle of the pack of developed countries, not out in front. We want to see a radical programme of business and personal tax reductions for the coming decade, in order to remedy that.”
