CBI Urges Brown Not To Raise UK Business Taxes

by Jason Gorringe, Tax-News.com, London

01 March 2005

As the UK budget approaches, Sir Digby Jones, director-general of the Confederation of British Industry has urged Chancellor of the Exchequer Gordon Brown to resist the temptation to raise the tax burden on the country’s businesses in the wake of several reports of hefty profits from firms based in the UK.

"There should be no hike in business taxation. The economic outlook is already uncertain and any increase in bottom line costs will have a serious and lasting effect on investment,” Sir Digby stated.

Banking group HSBC yesterday revealed record profits in excess of £9 billion, whilst the Royal Bank of Scotland has seen pre-tax profits jump to £6.9 billion for the year. With oil company Shell having announced record profits for a British firm of £9.31 billion last month, those advocating extra taxes on profits that may be judged as excessive have been growing more vocal in recent weeks.

However, Jones warned that windfall taxes would send a bad signal to international firms looking to do business in the UK, and warned Brown against such measures in the budget, due on March 16th.

“Windfall taxes may be seen in certain quarters as somehow justifiable punishment for record profits, but if highly successful global companies take the view that the UK has become hostile they will simply move their operations elsewhere," he cautioned.

The CBI chief also called upon the government to remove several "anomalies" from the taxation system, such as one which prevents firms from deducting costs incurred whilst raising equity finance.

The CBI also recommended that changes be made to the lower rates of corporation tax to allow associated companies to pay a single rate of tax; and that the tax treatment of investors in small quoted forms be changed so that it is equal to that of investors in unquoted companies.

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