CBI Survey Slams UK Corporate Tax Regime

by Jason Gorringe, Tax-News.com, London

28 November 2006

According to a new survey conducted on behalf of the Confederation for British Industry, business leaders believe the UK's corporate tax regime is worse than it was five years ago, and think the Government should cut business taxes and simplify the system to halt the country's declining international competitiveness.

The survey, published on Monday, revealed that seven in ten business leaders believe the UK is a poorer international business location than in 2001, and three-quarters think that the corporate tax regime is worse. Almost all are concerned with the increased complexity of the tax system, and the demands of compliance, as well as the rate of corporate tax compared internationally.

For the survey, Ipsos MORI interviewed senior executives from FTSE 350 companies and their equivalents from foreign-owned companies. Two-thirds of respondents (typically chairmen, chief executives and board directors) were dissatisfied with the Government's overall approach to tax and international competitiveness, and 77% said it does not adequately consider the latter when making tax changes.

Almost all (93%) believe that the Government does not give sufficient thought to the compliance burden, and 73% think it does not understand how - increasingly - tax features in corporate decision-making. One in four respondents think the UK business tax system is worse than other EU states with only 17 per cent preferring it. Interestingly, the USA is not, on balance, deemed as good as the UK.

In its Pre-Budget Report submission, the CBI urged the Government to help restore some "lost competitiveness" by starting a programme of straightforward reductions in the tax burden on business, and by simplifying the legislation and regulation which governs it.

Richard Lambert, CBI Director-General, argued that:

"In today's world of global markets, companies have many more choices to make about where to invest their capital and their talent than they did in the past. Business tax is one of the most important considerations that firms have to take into account, and it is easily measured."

"Our survey shows that business leaders believe the UK's corporate tax regime is more burdensome than it was five years ago, and that this is making the UK less attractive as an international business location."

"The worry is that on current trends our position relative to other developed economies will deteriorate further over the next two or three years. A couple of companies have already relocated to more friendly regimes, others have publicly said they've considered it, and more are refusing to rule it out."

He continued:

"No one expects a dramatic overnight shift - rolling back the tax burden, like turning an oil tanker, will take time. However, business needs a clear signal that the UK is going to shift course, first by checking the trend to a more burdensome business tax regime, and then by moving back up the competitiveness league tables."

"It is important to be absolutely clear about who pays for high business taxes. They fall on consumers, in the form of the higher prices that companies need to pay their increased costs. They fall on shareholders, large numbers of whom represent the interests of pensioners and savers. And they fall on the workforce, in the form of fewer jobs, squeezed wages, and lower business investment. High business taxes are not a way of making 'fat cats' squeal. They are a burden carried by the whole of society."

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