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£4.2bn extra tax burden
will hit UK businesses hard
Businesses will pay an extra £4.2bn in tax over the next three
years from new tax rules and the end of investment allowances
British business faces a tax hike of over £4bn
over the next three years as a result of the
latest fiscal measures, CBI analysis of Treasury
figures shows. The net increase comes despite
the 2p cut in headline corporation tax and undermines
the government’s claim to be boosting the UK’s
international tax competitiveness. At a time of economic
slowdown and uncertainty, the government should be
helping business keep the economy growing, not raising
taxes, the CBI said. However, its
analysis of this April’s new tax rules
shows that UK businesses will pay
a net total of £4.21bn in taxes by
2010/11 on top of existing
financial demands.
Breaking this down, companies
will pay an extra £1.84bn in tax in
2008/9, £1.24bn in 2009/10, and
£1.13bn in 2010/11. The majority
of this comes from 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 (from 19% to 20% last
year, rising to 22% in 2009/10) will also deal smaller
companies a heavy financial blow.
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’s
happening. The consequence will be that hard-pressed
companies, which are already paying high rates of tax,
will find life getting even tougher. Despite enjoying a
decade of strong growth and stable economic conditions,
the government has little room to manoeuvre to give the
economy a booster shot in the arm when most needed;
instead it is leaning on the business community to shore
up its finances.”
Cridland continued: “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 latest 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.”
In March 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.
It used dynamic analysis to show that cutting the
headline rate of corporation tax to 18% over eight years
was not only affordable but would boost tax receipts over
the long term. According to the World Economic Forum,
the UK has slipped from fourth place in 1998 to 15th in
2003 on the Global Competitiveness Index. While the
UK’s corporation tax rate was third lowest in the EU in
1997, it is now the sixth highest and the effective
average corporation tax rate is the eighth highest in the
OECD.
In addition to the tax changes, several new
employment regulations have also come into force,
including new rules on consulting employees in small
firms and amendments to discrimination law. These
changes will add £303m to business costs and bring the
total cost of the 42 new employment regulations
introduced since 1998 to over £49bn.
david.b@atlas.co.uk
Does the UK need skilled migrants?
A recruitment specialist is calling for public policies to match the UK’s need for engineers
Those in the House of Lords who are calling for
caps on immigration should wake up to the
realities of recruiting in the UK, according to
Resourcing Solutions. Employers throughout the
country, including those from highly specialised sectors
such as construction, engineering and rail, are supporting
the Government’s recent implementation of a skilled
migrants points system in recognition of the skills
shortages the market is facing.
Massive skills shortfall
Richard Lawrance, Managing Director, Resourcing
Solutions says: “The influential parliamentary committee
within The Lords who called for limiting migration, should
make sure that any policy decision on the issue clearly
takes note of industry’s unanimous call for encouraging
skilled workers to come to the United Kingdom.
“Throughout the construction, engineering and
transportation industries we are seeing a massive shortfall
in the numbers of skilled workers. It is of crucial
importance that Lords recognise that limiting migration
must not result in reduced numbers of skilled workers.
“We all understand that we live on a small island, but
allowing free movement of all workers inside the European
Union, and then limiting the numbers of skilled workers
from outside will neither solve immigration concerns nor
help industry. There are currently large pools of highly
skilled workers from India and South Africa, for example,
who are making outstanding contributions to UK industry.
In order to make the 2012 Olympics as spectacular as we
all hope the UK needs as many skilled workers as
possible regardless of where they come from.
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INDUSTRIAL TECHNOLOGY • May 2008