Chambers urge Brown to axe 'fiction' of National Insurance

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The Independent Online

The Government should abolish the 55-year-old National Insurance scheme and merge it with general taxation, a business lobby group said yesterday.

The British Chambers of Commerce said NI contributions were simply a tax on income and it was a "polite fiction" that they were used to fund social security.

It said employees' NI payments should be merged with income tax and employers' contributions should be wrapped in with corporation tax.

In its submission to the Treasury ahead of the pre-Budget report, the BCC said compliance costs for small companies were almost a tenth of the total revenue raised.

"Business needs to have the burden of taxation reduced," the BCC said. "If government is unwilling to reduce the tax take, it can at least consider a major effort to simplify the tax system and reduce the costs of compliance."

Business leaders were surprised last year when Gordon Brown, the Chancellor, said he would raise NI contributions for workers and companies in this year's Budget.

The BCC said public sector borrowing would overshoot the Treasury's target by as much as £11bn, because of rising government spending. "We are concerned that unless this is brought back under control quickly that tax rises to make up this gap may be considered," it said.

It recommended the Government separate stamp duty on commercial from residential property and raise the sales threshold at which companies register for Value-Added Tax.

Meanwhile the Government said it was pushing ahead with its plans to modernise stamp duty, despite widespread criticism. The CBI called the changes "damaging" and a "stealth tax" that would drive up prices and cost jobs.

The proposals will see lease duty calculated on the net present value of the total rent payable, rather than using the length of the lease and the average annual rent as the basis for calculation.

Ruth Kelly, the financial secretary to the Treasury, said that the new Stamp Duty Land Tax, would be implemented on 1 December. She it would produce "a modern, efficient system of taxing land transactions which promotes fairness between taxpayers, reduces distortions and prevents avoidance".