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Business tax levels 'damaging UK' CBI pressures Darling on tax cuts
(about 9 hours later)
High taxes on business are damaging the UK economy, the Confederation of British Industry (CBI) has said. Chancellor Alistair Darling is facing a demand from business to cut corporation tax, as he makes final preparations for his first Budget on Wednesday.
The lobby group says a few years ago Britain had one of the most favourable corporate tax environments in the world but that has now deteriorated. The Confederation of British Industry (CBI) has said that high taxes on business are damaging the UK economy.
With Chancellor Alistair Darling due to give his first Budget on Wednesday, the CBI wants corporation tax cut from 28% to 18% by 2016 and a simpler system. However, dramatic tax cuts do not look likely given economic uncertainty and strained public finances.
But unions say such a cut would lead to tax hikes for "ordinary people". Instead, Mr Darling is expected to deliver "a green Budget", with measures to cut carbon emissions.
Public borrowing He is also expected to announce help for people struggling to pay energy bills and raise the duty on alcohol.
BBC business correspondent Nils Blythe said the CBI was arguing that cutting taxes would attract more global businesses to the UK, meaning that overall tax revenues would actually rise. Tax cut
CORPORATION TAX RATES UK 28%Germany 29.8%Netherlands 25.5%Italy 37.2% Richard Lambert, head of the CBI, said a few years ago Britain had one of the most favourable corporate tax environments in the world but that has now deteriorated.
But he added that the high level of public borrowing meant major tax cuts were unlikely in the short term. CORPORATION TAX RATES Italy 37.2%Germany 29.8%UK 28%Netherlands 25.5%
According to a CBI report written by 12 leading tax experts the UK has failed to match deep cuts made to corporation tax by nations like Italy and the Netherlands. The CBI wants corporation tax cut from 28% to 18% by 2016 and a simpler system introduced.
However, unions say a cut in corporation tax would lead to tax hikes for "ordinary people".
The call comes as business confidence in the government has deteriorated in the wake of the Northern Rock scandal, changes to capital gains tax and amid plans to tax non-domiciles.
Energy
Mr Darling is expected to present a plan to control the tariffs paid by 3.8m electricity customers and 2.8m gas customers who use pre-payment meters, according to the Financial Times.
The measures are thought to be aimed at stopping energy firms making an alleged £400m in excess profits from the country's poorest consumers.
The chancellor is also expected to unveil measures aimed at cutting carbon emissions from cars and a move to increase biofuel use.
Weekend newspaper reports said the chancellor might introduce a levy on new, larger cars, such as people carriers, that could increase their price by £2,000.
Competitive edge
According to a CBI report, written by 12 leading tax experts, the UK has failed to match deep cuts made to corporation tax by nations like Italy and the Netherlands.
It says since 1993 the main rate of UK corporation tax has been reduced by 5% to 28%, but Germany has halved its tax rate to 29.8% and the Netherlands has sliced off 9.5%, to 25.5%.It says since 1993 the main rate of UK corporation tax has been reduced by 5% to 28%, but Germany has halved its tax rate to 29.8% and the Netherlands has sliced off 9.5%, to 25.5%.
That means that the UK has slipped from fourth to sixth place in the ranking of EU nations with the lowest corporation tax rates.That means that the UK has slipped from fourth to sixth place in the ranking of EU nations with the lowest corporation tax rates.
Tax breaks
The Conservatives have also put pressure on the chancellor to cut business taxes.The Conservatives have also put pressure on the chancellor to cut business taxes.
Shadow chancellor George Osborne told the BBC the Tories planned to pay for cutting corporation tax to 25% by scrapping a number of business tax breaks.Shadow chancellor George Osborne told the BBC the Tories planned to pay for cutting corporation tax to 25% by scrapping a number of business tax breaks.
Interviewed on the Andrew Marr Show on Sunday, Mr Osborne said that there was currently "no scope" for a big cut in the business taxes because of the UK's budget deficit, which he described as the worst in Europe.
He said: "So I am suggesting a simplification of the system, getting rid of the very expensive reliefs and allowances that exist within the corporate tax system, and using the proceeds to cut the headline rate."
But TUC general secretary Brendan Barber said the chancellor should not listen to the CBI.But TUC general secretary Brendan Barber said the chancellor should not listen to the CBI.
"The CBI is calling for both much lower rates of corporation tax and for a huge increase in opportunities for big businesses and the super-rich to avoid paying their fair share of tax," he said."The CBI is calling for both much lower rates of corporation tax and for a huge increase in opportunities for big businesses and the super-rich to avoid paying their fair share of tax," he said.
"If their lobbying was to succeed, it would lead to tax hikes for ordinary people, damaging cuts to public services and abandoning Government commitments on child poverty." "If their lobbying was to succeed, it would lead to tax hikes for ordinary people, damaging cuts to public services and abandoning government commitments on child poverty."