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IoD Calls For Third 'Fiscal Rule' To Keep Tax Burden In Check

by Jason Gorringe,, London

03 December 2003

The Institute of Directors is calling on the Chancellor Gordon Brown to introduce a third ‘Fiscal Rule’ in his stewardship of the economy which will commit the Treasury to reducing the UK’s tax burden as a percentage of the nation’s Gross Domestic Product.

Whilst the IoD have been supportive of the Chancellor’s ‘Golden Rule’ which requires that over the economic cycle spending on the day to day running costs of government must be matched by tax receipts, and the ‘sustainable investment rule’, the institute says these are not enough by themselves to keep the tax burden in check.

Graham Cox, the IoD’s Director-General explained that “We want to see a simpler tax system and not just a simpler style of legislative drafting. What we would really like to see is a moratorium on new tax legislation - if legislation does not contribute to reducing the tax burden or simplifying the tax system, it should not be enacted.”

He continued: “Too much tinkering with the taxation rules – albeit, often with good intention – has led to fifty years of progressively over-complicating the system. The cumulative effect, as any business or self-assessing tax payer will tell you, is horrendous.”

The IoD proposals have come about in response to a recently undertaken survey of its members which asked whether the conduct of fiscal policy was favourable or unfavourable towards business. The results showed a net balance of 30% stating that it was unfavourable.

According to Graeme Leach, Chief Economist at the IoD: "The new Third Rule would provide a tremendous long-term boost to business confidence in the UK. It would also be extremely attractive to overseas investors in the UK. A government mindful of the new Third Rule would have to rein in tax and spend policies."

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