CBI Report Slams Labour Government On Business Taxes

by Jason Gorringe, Tax-News.com, London

14 October 2003

The Confederation of British Industry (CBI) published a study yesterday which seeks to scotch the myth perpetuated by the government that the business tax burden in the UK is lower than that of its competitors.

According to the report, the CBI reckons that by 2005/2006, the business sector in the UK will be paying £7.6 billion more in tax than in 1997 when the Labour government came to power, with the cumulative total reaching £54 billion.

Citing statisitics collected by the OECD (Organisation for Economic Cooperation and Development), the CBI contends that the tax burden on UK business is above the average of its main trading partners at 9.9% of GDP. This is significantly higher than the US (7.3%) and Ireland (7.2%), and roughly equal to Germany (10.1%) and the Netherlands (9.7%). Only France has a significantly higher burden at 14.4% of GDP.

However, the CBI survey points out that the UK's tax position is steadily worsening compared to its main competitors, as the tax burden on businesses in most of these countries is actually declining.

"The UK is not as good as it thinks it is on tax competitiveness and it's certainly not as good as it should be," Digby Jones, CBI Director-General explained.

The report shows that in addition to the major business taxes, minor taxes and costs are also rising rapidly. A good example of this is stamp duty and environmental taxes which the CBI says have tripled as a percentage of GDP since 1995.

"Don't look at the rate of tax, look at the total figures on the tax bill. Many countries give allowances and relief that result in a lower tax take than the UK," observed Mr Jones.

"The need to fund public services and the need to restrain business taxation are not incompatible," he added. "Capital can so quickly drain away from uncompetitive investment locations and once gone it may never return. Better public services will come from better utilisation of government resources, not simply by paying more."

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