LONDON (Reuters) - Britain’s biggest business lobby group has launched a comprehensive review of the nation’s corporation tax regime, which it says is harming companies’ competitiveness and is in urgent need of reform.
The Confederation of British Industry has pulled together a “Tax Task Force” of leaders from major firms such as ICI, Pfizer, Cadbury Schweppes and Barclays and tax experts to come up with new ideas to reform the current system.
Chancellor Gordon Brown announced a cut in the corporation tax rate to 28 percent from 30 percent from next year in his March Budget, taking it below that of other big economies such as the U.S., Germany, France and Japan.
That, says CBI Director General Richard Lambert, was a step in the right direction, but deeper reform is needed to make the tax system competitive in the long term, especially as firms now have more choice over where they are based and pay tax.
A survey by the business group last year showed that one in five UK firms had relocated some of its activities overseas because of gripes over tax.
“Companies have a lot more choices than they used to have. The time has come for a more strategic, coherent and forward-looking approach,” Lambert told a news briefing.
The Task Force, to be spearheaded by CBI chief economic adviser Ian McCafferty, will publish its report early next year.
Lambert insisted the aim of the exercise was to come up with ways to simplify the tax system rather than lobby for more cuts in corporation tax, but he stressed a reform of the current system would benefit both government and companies.
“There needs to be a healthy and sustainable flow of business taxes: the current tax rate is not sustainable. Either the rate will go down or companies will make their profits elsewhere.”