UK Manufacturers Warn Taxation Is Damaging UK Competitiveness

by Robert Lee, Tax-News.com, London

18 October 2005

At a time when the overall tax burden in many OECD and European Union member states is falling, the UK manufacturing sector has warned the British government that increasing levels of taxation and red tape are now eroding the UK's competitiveness as a location for manufacturing industry.

According to a report released by EEF, a UK manufacturers' organisation, in 2005/6 business will pay an additional £2.2 billion annually in corporation tax and an additional £5.5 billion in other business related taxes following tax changes since 1997. Much of this tax increase will come from 'input taxes' such as the Climate Change Levy.

The report goes on to note that over the same period only a handful of OECD countries will have seen a greater increase than the UK in their tax burden, whilst the United States and many EU countries both large and small have seen their tax burdens fall.

Commenting on the report, EEF Director General, Martin Temple observed that while the government is enthusiastically promoting innovation and improving skills on the one hand, it is effectively nullifying this policy by making life difficult for businesses through increasingly complex tax legislation.

“Our long-held competitive advantage on tax is starting to erode. The UK's tax burden has been rising while falling in many other countries, who are actively designing their tax systems to attract high value manufacturing," Mr Temple warned.

To remedy these concerns, EEF is urging the government to shelve any plans for increases in input taxes, such as National Insurance contributions, and to take concrete steps to reduce the cost of complying with the tax system. Furthermore, EEF wants the emphasis in environmental taxation switched away from the 'stick' and towards the 'carrot' approach.

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