Business attacks Brown's tax rises

Business reacted with anger yesterday after Gordon Brown tightened the screw further on the corporate sector with a series of measures that will raise hundreds of millions of pounds in new taxes.

The Confederation of British Industry attacked the Chancellor's "silence" on the critical issue of tax competitiveness and repeated its warning that the UK's fiscal regime could drive companies abroad.

Small businesses also criticised the pre-Budget report for not doing enough to tackle red tape, bolster transport and open up Whitehall procurement budgets.

But the TUC praised Mr Brown for producing a report of "substance", describing his package of measures to boost education skills and research and development and to tackle child and pensioner poverty as "sensible and prudent".

Richard Lambert, the director general of the CBI, said: "Business did not expect a reduction in taxes today, but hoped for some recognition of the growing disparity between the UK rate of corporation tax and those elsewhere. This, together with the complexity and compliance burden, risks business investment shifting overseas."

An analysis carried out by the accountants Deloitte & Touche of the new tax measures announced yesterday calculated that the Chancellor had added a further £500m to the tax burden on business. Deloitte & Touche tax partner John Cullinane said the Chancellor's anti-avoidance measures had increased business taxes by £15bn to £50bn in the past couple of years.

He added: "They appear to be daring people to leave. What they are saying is, either you stay here and lump it or relocate overseas."

Stephen Herring, a tax partner at BDO Stoy Hayward, described the statement as "a lost opportunity" to simplify and reduce corporate taxes. "The Chancellor is now in danger of leaving a legacy of both increasing tax complexity for individuals and businesses and retaining an uncompetitive corporation tax rate for UK plc."

According to a survey published last month by the CBI, seven out of 10 company chiefs think the United Kingdom is a poorer location in which to do business today than it was in 2001. The UK's current corporation tax rate of 30 per cent compares with an EU average of 25 per cent, and Mr Lambert said he was concerned that the raft of "anti-avoidance" measures announced by the Chancellor were further raising the overall tax burden on companies.

Angela Knight, the chief executive designate of the British Bankers Association, described the pre-Budget report as "lacking imagination. We were looking for a review of corporate taxation because the tax that companies pay has risen substantially".

Business fury over the renewed tax onslaught overshadowed the broad welcome given to many other aspects of the Chancellor's speech yesterday.

The CBI said that the new emphases on training, skills, planning, transport and intel-lectual property were all welcome and promised to make a real difference to the UK's competitiveness.

The British Chambers of Commerce, which represents mainly small and medium-sized companies, struck a more cautious note, saying: "The Chancellor has laid out, on the face of it, an impressive wish list. The test now for the Government is to show it can deliver upon all that has been promised.

"Business will want reassurance that this is all affordable and there will not be significant tax rises in the March Budget."

Although broadly supportive, the TUC took the Chancellor to task over his announcement of further cost reductions across Whitehall, accusing him of "playing a numbers game" with Civil Service jobs.

"Casual assumptions that Civil Service posts can be cut to no effect or easy slogans about cutting back-office staff to help the front line are mistaken," said the TUC's general secretary, Brendan Barber.

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