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Company bosses have once again expressed fears about a loss of competitiveness within the British tax system and have demanded that the country ‘raise its game’ to appeal more to big business.
A new report from the Institute of Directors (IoD) concludes that the Government is heading in the right direction on tax policy but must make considerable additional effort to attract new investment and prevent established firms from shifting their bases of operations out of the UK.
‘Recent company departures… are an urgent wake-up call,’ said IoD director-general Miles Templeman. ‘The UK must raise its game on tax competitiveness or lose investment, jobs and tax revenue. Countries are just like supermarkets in this respect: the competitive ones win, the others lose out.’
Last month, an IoD paper criticised the Government’s mooted graduate tax for having the potential to damage the country’s tax competiveness. The organisation’s latest study – published a week after builders’ supplies giant Wolseley became the most recent high-profile group to announce a move overseas – notes that the country’s corporation tax rate of 28% means 18 out of 31 Organisation for Economic Co-operation and Development members have lower rates.
‘Even the Government’s planned rate of 24% will not put the UK out in front of the pack,’ said the institute, which boasts around 45,000 members from across the spectrum of industry.
Its report goes on to claim that highly skilled, mobile workers who seek low marginal tax rates will tolerate the 40% income tax band but will be repelled by the 50% level – and employers’ National Insurance contributions are a ‘massive burden’.
Bosses warn the Government not to ‘give with one hand and take away with the other’ by consulting on reforms to international taxation, including the controlled foreign companies regime, while proposing new restrictions on the deductibility of interest.
The IoD’s head of tax, Richard Baron, remarked, ‘We are pleased that the coalition has chosen the right direction of travel on tax policy. If we deal with the deficit primarily on the spending side, it gives us freedom to reduce tax burdens – and the proposal to reduce the corporation tax rate to 24% is very welcome, but it is not enough.
'Nor will a positive outcome to the ongoing consultations on controlled foreign companies and branches be enough. The Government needs to keep up the momentum on tax cuts, and not wait until the next parliament,' said Mr Baron.
