Business faces tax hike, says CBI
UK businesses will have to cope with a tax rise of £4.2 billion over the next three years as a result of the Budget, the CBI has argued.
Using Treasury figures, the CBI calculated that this month’s new tax rules mean that UK businesses will pay a net total of £4.21 billion in taxes by 2010/11 on top of existing financial demands.
Broken down on an annual basis, companies will need to find an extra £1.84 billion in tax in 2008/9, £1.24 billion in 2009/10, and £1.13 billion in 20010/11.
The hike comes despite the 2 per cent reduction in headline corporation tax.
Most of the increase, the employers’ organisation said, is accounted for by the loss of plant and machinery investment allowances and the abolition of empty property relief.
The penny in the pound increases to the small business tax rate (due to rise to 22 per cent in 2009/10) will impose an additional financial burden on smaller companies, the CBI added.
Last month an independent taskforce commissioned by the CBI published its analysis of the UK tax regime and argued that the system was in need of a radical overhaul.
Cutting the headline rate of corporation tax to 18 per cent over eight years was not only affordable but would boost tax receipts over the long term, the report claimed.
John Cridland, deputy director-general of the CBI, said: “When the economy is slowing, the last thing a government should do is raise taxes on the part of society which creates jobs and wealth, but that’s what is happening.”
Mr Cridland continued: “The consequence will be that hard-pressed companies, which are already paying high rates of tax, will find life getting even tougher.
“The UK has been slipping down the league table for international tax competitiveness for years and has become increasingly less attractive to overseas investors, and the changes will make this even worse. This has been exacerbated by the abrupt changes to capital gains tax and the poorly handled reforms of non-domicile taxation - personal issues rather than business tax but ones that heavily influence the general business climate.”
A Treasury spokesperson responded by saying that the government measures will help UK business and enterprise: “The UK’s corporation tax rate [has been] cut by 2p to 28p – its lowest ever level, and the lowest of all major industrialised nations – and a new annual investment allowance will be introduced for all UK firms, providing a major incentive for them to expand or improve their business.”