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CBI CALLS FOR£2BN BUDGET TAX CUT AND NEW DRIVE TO REVERSE SURGE IN BUSINESS COSTS

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The Confederation of British Industry is pressing chancellor Gordon Brown for budget tax cuts of up to£2bn and the...
The Confederation of British Industry is pressing chancellor Gordon Brown for budget tax cuts of up to£2bn and the start of a sustained programme to reduce business costs over the next four years.

It says this is needed to reverse the rise in business taxes due to legislative changes since 1997, which have cumulatively cost firms some£29bn. Over the same period, business profitability has fallen sharply.

Publishing its budget submission today, the CBI praises Mr Brown for starting on its proposed tax cuts by recently announcing£500m-worth of reductions.

But the employers' organisation points to OECD figures showing the UK still has high business taxes compared with its top five trading partners. The UK's business tax burden (13.2% of GDP) is higher than the US (9.5%), Ireland (11.5%) and Germany (12.7%). It is level with the Netherlands (13.2%) and lower than France (18.9%).

In addition, official data for UK business profitability shows net rates of return in the service sector fell from 17.2 per cent in 1997 to 12.5 per cent last summer. In the manufacturing sector, net returns fell from 10.9 per cent to 4.3 per cent over the same period.

Digby Jones, CBI director-general, said: 'The increasing tax burden is eating into the ability of firms to fund expansion, create wealth and sustain more and better-paid jobs. The government must begin rolling back these costs or end up paying a high price.

'Business is so globally mobile and the UK must maintain its position as the international location of choice. We need an increasingly competitive tax regime to attract and retain the companies of the future.'

He added: 'There is rightly huge pressure to improve public services. But the chancellor already plans large increases in expenditure and business should not be seen as a soft touch. Furthermore, if there is to be more money for public services, it must be linked to significant reform. Better value for money is vital - more money alone is not the answer.'

The CBI wants a range of measures designed to raise productivity and promote entrepreneurship. Priorities for this and future budgets include:

* A 'meaningful' tax credit for research and development

The CBI praises the chancellor for keeping the credit simple but says it must also be substantial enough to make a difference, a credit worth around£1bn would achieve this.

* A tax credit to help smaller firms train employees

The CBI wants a credit probably costing around£60m to encourage smaller firms to identify skill needs and qualify for an Investors in People Award.

* An extension of discount eligibility criteria on the Climate Change Levy

The CBI wants to make the levy fairer by allowing more firms to get discounts in return for commitments to improve energy efficiency.

* A reduction in stamp duty on business property

The CBI believes this is needed to remove unwarranted penalties on firms that are relocating or restructuring in order to meet market needs.

* Measures to resolve problems compared with international competitors

The CBI recommendations include a reduction of VAT on tourist accommodation and a review of the impact of stamp duty on share transactions.

The cumulative£29bn tax increase does not include the cost of complying with complex new tax rules, or increases resulting from pre-1997 Budget changes that have since come into effect. Nor does it include expenditure of£22.5bn on the mobile phone licence auction and£12.3 billion on meeting requirements of this government's employment regulations.

Digby Jones said: 'It is wrong to see raising business taxes as a less painful alternative to politically unpopular individual tax increases. After-tax profits are inextricably linked with the ability to pay good wages, offer competitive prices and invest for the future.'

NOTES

Attached is a PDF file containing the submission.

The CBI met the chancellor to discuss the proposals on March 19, 2002.

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