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Call for more competitive corporation tax

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A leading business group has argued that the UK’s tax system must be made more competitive in order to keep and attract firms.

The Institute of Directors (IoD) said that, although the government is heading in the right direction on tax policy, greater efforts need to be made to attract new investment and to stop companies moving their bases of operations out of the UK.

Miles Templeman, the IoD’s director general, insisted that the “UK must raise its game on tax competitiveness or lose investment, jobs and tax revenue”.

Mr Templeman highlighted plans for reductions in corporation tax as a start but added that pulling the rate down to 24 per cent, as intended, over the next four years will still leave the country at a disadvantage compared with a number of its competitors.

The IoD report said: “Even the government’s planned rate of 24 per cent will not put the UK out in front of the pack.”

The report also focused on personal tax rates.

It noted that highly skilled, mobile workers who seek low marginal tax rates will tolerate the UK’s 40 per cent income tax band but may baulk at the top 50 per cent rate.

It described employers’ national insurance contributions are a “massive burden”.

Richard Baron, the IoD’s head of tax, commented: “We are pleased that the coalition has chosen the right direction of travel on tax policy.

“If we deal with the deficit primarily on the spending side, it gives us freedom to reduce tax burdens – and the proposal to reduce the corporation tax rate to 24 per cent is very welcome, but it is not enough.

“‘The government needs to keep up the momentum on tax cuts and not wait until the next parliament.”