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Last Updated: Monday, 27 November 2006, 10:15 GMT
CBI attacks Britain's tax regime
City of London skyline
The UK's main corporation tax rate is higher than the EU average
An expensive and complex corporate tax regime is hitting the UK's reputation as an attractive business location, according to a CBI survey.

The business organisation polled top executives in nearly 100 major firms and found that two-thirds were unhappy with the government's tax regime.

It was a major factor for the 20% of firms that had shifted some operations abroad and the 30% considering it.

The results were unveiled at the start of the CBI's annual conference.

The international competitiveness of UK business is top of the agenda at the gathering, which is also debating the issues of globalisation and energy security.

The Treasury rejected the idea that the UK was uncompetitive because of heavy taxes.

"The World Bank recently found that the typical UK business faces the lowest total tax rate in the G7, the fifth lowest in the OECD," said a Treasury spokesperson.


The CBI's two-day meeting in London will have one notable absence.

Conservative Party leader David Cameron, who was due to talk at the event, has pulled out to visit British troops in Iraq instead.

He will be replaced by shadow chancellor George Osborne.

CBI president Sir John Sunderland said he was "disappointed" that Mr Cameron would not be attending the conference.

"It would have given him a chance to address some of the uncertainties about his position on a number of important business issues, so we see this as a missed opportunity," Sir John said.

Greater certainty

Business leaders believe the UK's corporate tax regime is more burdensome than it was five years ago
Richard Lambert, CBI

Earlier this month, Chancellor Gordon Brown said he would implement the full recommendations of Sir David Varney, who has been looking at how to improve the relationship between the tax authorities and large businesses.

His Pre-Budget Report on 6 December is expected to include a range of announcements on cutting red tape and giving firms greater certainty about their tax position before they proceed with major investments.

The CBI survey found that complexity of tax rules and the burden of complying with them were seen as the top gripes by major firms.

It also highlighted fears over the UK rate of corporation tax, which has slipped from 10th best in the OECD (a group of 30 leading developed nations) in 2000 to 18th in 2005.

At 30%, the main UK corporation tax rate is about five percentage points higher than the EU average and compares poorly to that of the Irish Republic, a key competitor, which has a rate of 12.5%.

'Burdensome taxes'

CBI Director General Richard Lambert
Mr Lambert says tax is a key factor for firms considering where to invest

The CBI has written to the government ahead of the Pre-Budget Report, calling on it "to help restore some lost competitiveness" by reducing the tax burden on business, and simplifying the regulation which governs it.

"Our survey shows that business leaders believe the UK's corporate tax regime is more burdensome than it was five years ago, and that this is making the UK less attractive as an international business location," said CBI director-general Richard Lambert.

"The worry is that on current trends our position relative to other developed economies will deteriorate further over the next two or three years.

"A couple of companies have already relocated to more friendly regimes, others have publicly said they've considered it, and more are refusing to rule it out."

The world's third-largest bank, HSBC, recently said it could cut 400m off its annual tax bill if it relocated its UK head office abroad.

Tax and regulatory factors have also led two companies in the Lloyd's insurance market, Hiscox and Omega, to announce that they are relocating to Bermuda.

Commenting on the survey, Conservative shadow chancellor George Osborne said that he hoped to introduce measures to "radically simplify business taxes" with his very first budget, if elected.

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