UK Business Sector Expresses Anger At Budget Tax Hikes

by Jason Gorringe, Tax-News.com, London

22 April 2002

British business groups expressed anger and disappointment last week at the fact that the majority of the increased tax burden announced in Chancellor Gordon Brown's Wednesday budget will fall on their shoulders.

Following a Financial Times report, which revealed that around three-quarters of the increase will fall on businesses, mainly through the hike in employers' National Insurance Contributions, industry groups have hit out at the supposedly 'pro-enterprise' budget.

David Lennan, the Director General of the British Chambers of Commerce (who stepped down from his post on Thursday) observed that:

'After several steps forward this is a budget that has reached a plateau in driving business competitiveness and prospects forward.' He added that: 'Raising national insurance rates makes a mockery of the distinction between income tax and national insurance. It is high time that one of our political parties stopped this farce, and had the courage to merge the two systems, saving our small businesses billions of pounds a year.'

The former BCC chief did say, however, that the organisation welcomed the Chancellor's announcements on VAT for importers, simplification of the VAT system, and CGT reductions.

Although in his budget the Chancellor included compensation for businesses in the form of R&D tax credits and a cut in the corporate taxation rate for small companies, many UK SMEs feel that these measures were overshadowed by the tax increases.

Stephen Radley, Chief Economist at the Engineering Employers Federation, revealed on Friday that many of the group's members feel that they have been 'shafted by the government'.

In a letter to the FT, the Foreign Banks and Securities Houses Association also warned that moves to reconsider the taxation of resident non-domiciled high net worth individuals, coupled with a change in the tax treatment of UK branches of foreign banks could have dire consequences for the country's banking sector.

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