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Corporation tax should fall further

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The CBI has welcomed the Government’s pledge to introduce a phased reduction in corporation tax to just 24 per cent.

In its submission to the Government’s consultation document, Corporate Tax Reform: delivering a more competitive system, the employers’ group said that the reduction in the main corporate tax rate was a good move.

However, the CBI also insisted that the Government should eventually go further, once the public finances have been stabilised.

To make the UK truly competitive, the rate should fall below 24 per cent at some future stage.

In the shorter term, the Government should concentrate on easing the tax burden faced by businesses.

The CBI gave its backing to the proposed introduction of the Patent Box which will complement the existing R&D tax credit scheme by making the UK a more attractive home for holding and exploiting intellectual property.

But, the business group added, there needs to be more joined up thinking across the whole lifecycle of innovation to make the UK tax regime among the most competitive for intellectual property.

On the broader tax front, the CBI paper cited the 50p tax rate as a barrier to attracting some of the best talent to the UK, particularly in knowledge-intensive sectors such as research and development, design and innovation, and professional services.

John Cridland, the CBI’s director-general, commented:?”Encouraging companies to base their operations in the UK will create jobs and growth. The Government’s commitment to move towards a lower corporate tax rate will help this, but at the same time it must address the effective tax burden on businesses which currently makes the overall system uncompetitive.

“The Government also needs to address international perceptions that HMRC is very aggressive in its treatment of Controlled Foreign Companies. We recognise the need to maintain the UK tax base, but anti-avoidance measures must be proportionate to the perceived risk, and targeted at specific abuse. A heavy-handed scatter-gun approach could deter outbound investment.

“We welcome the introduction of the proposed Patent Box, but there is also a need to examine measures to incentivise development of intellectual property beyond the research stage, covered by the R&D tax credit, but prior to the creation of a patentable product.”