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 Monday, 8 April, 2002, 12:13 GMT 13:13 UK
CBI calls for 2bn budget tax cut
Digby Jones
The CBI's Digby Jones: Pushing for corporate tax cuts
The Confederation of British Industry, the UK's main business lobby, has urged Chancellor Gordon Brown to cut British firms' tax burden by 2bn in his 2002 budget.

The lobby on Monday said the cuts are needed to help British businesses compete with their counterparts in lower-tax economies.

The CBI cited figures showing that British firms pay the equivalent of 13.2% of gross domestic product in tax, compared to just 9.5% in the US and 12.7% in Germany.

"Business is globally mobile and the UK must maintain its position as the international location of choice," said CBI Director General Digby Jones.

"We need an increasingly competitive tax regime to attract and retain the companies of the future."

Growing burden

The proposed cut would also help to reverse a 29bn increase in the business tax burden since the New Labour government came into power in 1997, the CBI said.

Higher tax bills have helped to push British service businesses' net rate of return - a measure of profitability - from 17.2% in 1997 to just 12.5% last year, according to CBI figures.

Average profits in the manufacturing sector have fallen even more steeply over the same period, plunging from 10.9% to 4.3%.

The proposed business tax cuts would clash with government commitments to boost spending on Britain's public services.

Chancellor Brown's 2002 budget, to be unveiled on 17 April, is widely expected to usher in spending increases aimed at soothing public dissatisfaction over poor health, education, and transport services.

Spending clash

But the CBI warned in its annual budget wish-list that further public spending increases should be put on hold if they can be achieved only though higher taxation.

"There is rightly huge pressure to improve public services, " said Mr Jones. "But the Chancellor already plans large increases in expenditure and business should not be seen as a soft touch."

Improvements in public services should instead be achieved through greater cost efficiency, he said.

The CBI also called for targeted tax breaks aimed at encouraging scientific research and staff training.

It is also pushing for a wider range of exemptions to the government's controversial Climate Change Levy, a tax on energy use aimed at curbing environmentally harmful gas emissions.


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