CBI launches broadside against tax plans

Complaints from the Confederation of British Industry (CBI) about higher taxes on business got an unsympathetic response from the Treasury yesterday. However, fresh accusations that the proposed Individual Savings Accounts (ISAs) will damage savings will cause more concern.

The CBI said that measures in last July's Budget and proposals in November's pre-Budget Report would add pounds 22bn to the tax burden on business during this Parliament. Adair Turner, director-general, called on Gordon Brown, the Chancellor of the Exchequer, to change plans to abolish advance corporation tax as these would reduce companies' cash flow available for investment.

"The most worrying impact is going to be on small and medium-sized companies," he said.

The CBI would like special measures to help small firms with sales of less than pounds 300,000 adjust to the tax changes extended to companies in the pounds 300,000 to pounds 1.5m sales bracket. Kate Barker, chief economist, said: "This would help the fast-growing firms the Government wants to encourage to invest without costing very much."

It was the first real criticism the employers' organisation has levelled publicly at the Government since 1 May. But the Treasury shrugged off the complaint.

A spokesman said a 2 per cent cut in the rate of corporation tax announced in July and a further 1 per cent cut announced in November were worth pounds 9bn to business in today's money. He said the CBI had welcomed the proposals in principle in November.

Yesterday also brought fresh criticisms of the proposed ISAs. The National Institute of Economic and Social Research warned the measure could reduce the nation's wealth by about pounds 31bn, the equivalent of 4 per cent of GDP, because ISAs would cut savings by the well-off without increasing savings by the low-paid nearly as much.

However, both the CBI and NIESR defended the Chancellor against accusations he was building up a war chest of tax revenues to spend in the run-up to the next election. Mr Turner said: "We support the Government's firm line on public spending.

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