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Tax changes would help support economic recovery

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The Chancellor has been urged ahead of his pre-Budget Report to introduce changes to the tax system as a way of helping to stimulate economic growth.

In its pre-Budget Report submission, the CBI argued that a series of short-term tax and regulatory measures could ease the pressure on firms and encourage business investment.

Specifically, the CBI has backed the case for maintaining and improving the research and development tax credit scheme in order to promote innovation.

The employers’ group also wants to see the costs of raising equity made tax deductible for SMEs and the tax treatment of debt and equity equalised to help cash-strapped small firms.

Planned changes to the pension tax relief system for higher earners should be reconsidered by the Chancellor, the CBI went on to say, as they will weaken incentives to save.

Extending the Pension Regulator’s ten year trigger and de-regulating small mergers would likewise help, while the government should rethink a number of planned business tax increases, as in the cases of National Insurance contributions, landfill tax, Air Passenger duty and the timing of the VAT rise.

John Cridland, the CBI’s deputy director general, said: “With firms still facing challenging conditions and credit still not flowing freely around the economy, there are a number of relatively low-cost measures the government could adopt to help.

“Delaying some business tax rises that are in the pipeline and making some sensible regulatory changes would give businesses the headroom to recover, so they can help drive economic growth and support jobs.”