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Changes to residence and domicile taxation and the way they were handled by the Treasury have badly damaged the UK as an attractive business location, according to the latest London Business Survey.
It also claims that 80% of London's business leaders believe the £30,000 fixed charged for non-domiciled earners who opt out of paying taxes on overseas income has tarnished the country's reputation.
And more than half of the capital's senior executives fear the city's competitiveness is under threat.
Asked about the recently introduced £30K fee, 70% of respondents said it will adversely affect London's attractiveness as an international business destination — while 82% claimed that the Chancellor's handling of the tax reform has damaged the nation's reputation for tax stability and planning.
The report — produced twice a year by the CBI and KPMG — contradicts the findings of a survey released this week by Barclays Wealth, which suggested that non-domiciled taxpayers have quickly accepted the £30,000 fixed charged and recognise that the UK remains the best place in the world for people of their tax status.
One of the reasons for the country's continued appeal were the many facets of London.
The new CBI/KPMG survey shows that 90% of respondents still view the capital as a favourable place to do business, but only one in 12 believe the capital's competitiveness is improving.
Thirty-seven percent of respondents say they have moved some activities off-shore, an increase from 33% a year ago — and four-fifths claim this has benefited their firm.
KPMG London chairman Richard Reid remarked that many of the survey's findings 'should be setting off alarm bells for policy-makers that urgent action is needed to tackle the weaknesses that will compromise London's reputation and competitiveness.
'And, after so many promises to reduce damaging red tape, policy-makers have to realise that the burden of unnecessary paperwork is seriously hindering London's success and its ability to just get on and do business in an increasingly competitive world.'
CBI director-general Richard Lambert commented: 'It is important that politicians listen to the very real concerns of business and ensure that all sides pull together to tackle the issues they can influence and mitigate those they can't'.
