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INDUSTRY NEWS www.industrialtechnology.co.uk £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. 8 INDUSTRIAL TECHNOLOGY • May 2008
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