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CBI Issues UK Budget Wishlist

by Robert Lee,, London

27 February 2012

Changes to the UK's tax system could help generate investment and stimulate growth, the Confederation of British Industry (CBI) has said.

The CBI has presented its submission to the 2012 Budget, which will be delivered on March 21. In it, the business group urges Chancellor George Osborne to use the Budget to score the growth and investment policy goals he put forward in his Autumn Statement and give the UK economy and jobs a real boost. It recommends a series of measures, which include a new capital allowance, new forms of finance, and reform of environmental taxation.

The CBI is clear that the government needs to boost growth through reforms of the UK’s tax system. It believes the government must ensure that planned changes to the country's Controlled Foreign Companies regime result in a simpler way of taxing foreign profits. It wants to see a less complicated “Gateway” than is currently in the government’s draft legislation. The Gateway is intended to specifically identify circumstances where an artificial diversion of profits has taken place.

The government is also encouraged to introduce a new capital allowance to attract investment into types of infrastructure which do not currently qualify. This, the CBI says, would apply only to future spending, to minimize cost to the Exchequer and ensure the proposal incentivizes new private investment in infrastructure. The flow of credit to companies must be improved, the CBI adds, especially those with high growth potential, by expanding the Enterprise Investment Scheme. In addition, it calls for the cost of raising equity for small and medium-sized businesses to be reduced, and incentives improved for entrepreneurs’ relief, as soon as the public finances allow.

Lastly, the CBI would like to see the government ensure that environmentally-related taxes do not undermine growth and investment. This could be done by replacing the Carbon Reduction Commitment (CRC) with a new Climate Change Levy (CCL) to cut confusion and complexity for businesses while protecting the Treasury’s revenue stream. The government also must "get the increase in Air Passenger Duty right," the CBI argues, adding that it must balance the amount of tax raised by the Treasury with the value of aviation to the economy, and peg this year’s rise to inflation at 5%, rather than the full 8% as planned.

Commenting on the CBI’s proposals, Ian McCafferty, CBI Chief Economic Adviser, said: “Companies that lack certainty on how they will be taxed in the future are reluctant to invest, so Government must deliver on its corporation tax roadmap without delay. We must make sure that we continue to attract and keep successful multi-national businesses in the UK."

“We should ensure our tax system encourages rather than stifles private sector investment through better use of capital allowances. We also need to encourage innovation through our tax system, and design environmental taxes which promote sustainable, value-added growth. Our new proposals are designed to help Government realize its ambition for the UK to have the most competitive tax regime in the G20,” McCafferty explained.

TAGS: environment | tax | business | tax incentives | fiscal policy | aviation | entrepreneurs | budget | United Kingdom | environmental tax | legislation | tax reform | inflation

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