EEF, the manufacturers’ organisation believes this should be set as part of a wider, medium-term strategy to address the deterioration in the
UK ’s tax competitiveness. It backed its call with a survey of companies’ views on the current UK tax system and its impact on their businesses. The results provided evidence of the increased tax burden companies are now facing, especially amongst small and medium size businesses.
Commenting, EEF's Chairman Martin Temple, said:
“Currently the government’s strategy for business taxation is muddled, with repeated changes and new measures which have sometimes been reversed rapidly. Business also feels that its priorities for competitiveness, simplicity and predictability are being presented as trade-offs.
“As other countries move to improve the competitiveness of their tax systems, manufacturers believe that the UK is heading in the wrong direction. If government is to recover the confidence of business and investors, it needs to set out a more coherent strategy of how it will deliver a more competitive business tax regime.”
According to the survey of 285 companies, 54% of companies said that their tax burden had risen in the last five years, with one in eight describing the increase as significant.
Furthermore, smaller companies with between one and fifty employees were more likely to say that their tax burden had risen. And, given the competitive environment, almost 90% of companies reported little or no ability to pass on the cost of tax rises.
The report also found that business needs a simpler tax system. As a result of over 200 changes to the tax system since the 1997 Budget, almost 75% of firms thought either the volume of new legislation or, the frequency of changes, were to blame for complexity in the tax system. Consequently, almost half of the firms said that the number of personnel and time required to deal with tax matters has risen.
In addition to setting out a comprehensive and coherent strategy for business taxation in the medium term, EEF has recommended:
- Steps be taken to improve the relationship between SMEs and government by extending Sir David Varney’s suggestions for a risk-based approach to dealing with tax matters, speedy resolution of issues and clarity through consultation on HMRC’s dealings with SMEs.
- Legislation on a principles based approach to financial products be delayed for a year to enable the full consequences for UK companies to be assessed.
- An examination of the falling number of entrepreneurs in the UK and the success of measures to ease regulation, improve access to finance and how to help the growth of small firms.
- The development and promotion of a long term strategy to support business in maximising opportunities to deliver a low carbon economy.
ENDS