Our complicated taxes harm UK businesses

November 23, 2012 5:08 PM

The overall burden on companies of Britain’s tax system has risen up 2 places in a world ranking compiled by the World Bank and PwC. It’s not often that British taxpayers get something to smile about and our smiles won’t be that wide at this news, either. We’ve climbed up from 18th best to the giddy heights of 16th.

While movement up the table is welcome, the fact that the UK is just a place above Kazakhstan and five places below where it was in 2006 shows that there’s a lot that’s left to be desired. So what’s dragging us down the league tables?

The report cited our system’s devilish complexity as a principal reason for the UK’s poor position in the table.

The problems are well illustrated by the fact that while an average sized business in the UK has to make eight tax payments a year and spend 110 hours on tax compliance, a similar sized company in the United Arab Emirates (UAE) makes half as many payments in a tenth of the time. But it’s not just the UAE. There are 20 other countries which also don’t require businesses to spend so many hours preparing their tax returns.

Rates don’t help, either. Corporation Tax in Ireland stands at just 12.5 per cent compared to 24 per cent in Britain. It’s blindingly obvious why major corporations don’t want to base their operations here.

Tax regimes in oil-rich middle-eastern countries are flattered by the value of the oil captured by governments in those countries. So Britain can’t be directly compared with them. But among the top ten systems are Canada, Singapore and Ireland. There’s no reason why we shouldn’t aim for a better system than Canada’s, for example. Business is crying out for tax simplification – 79 per cent of directors want Income Tax and National Insurance fully merged for example. Our recent Towards 2020 paper How to abolish National Insurance shows the Government how it can merge the system without creating large groups of losers.

The 2020 Tax Commission’s final report The Single Income Tax outlines the complete overhaul of UK taxes that any Government intent on pushing Britain back up the tax tables. Radical reform would boost enterprise, create jobs and restore growth to our flat-lining economy. It’s time the Government got to work. Taxpayers deserve better than 16th best.The overall burden on companies of Britain’s tax system has risen up 2 places in a world ranking compiled by the World Bank and PwC. It’s not often that British taxpayers get something to smile about and our smiles won’t be that wide at this news, either. We’ve climbed up from 18th best to the giddy heights of 16th.

While movement up the table is welcome, the fact that the UK is just a place above Kazakhstan and five places below where it was in 2006 shows that there’s a lot that’s left to be desired. So what’s dragging us down the league tables?

The report cited our system’s devilish complexity as a principal reason for the UK’s poor position in the table.

The problems are well illustrated by the fact that while an average sized business in the UK has to make eight tax payments a year and spend 110 hours on tax compliance, a similar sized company in the United Arab Emirates (UAE) makes half as many payments in a tenth of the time. But it’s not just the UAE. There are 20 other countries which also don’t require businesses to spend so many hours preparing their tax returns.

Rates don’t help, either. Corporation Tax in Ireland stands at just 12.5 per cent compared to 24 per cent in Britain. It’s blindingly obvious why major corporations don’t want to base their operations here.

Tax regimes in oil-rich middle-eastern countries are flattered by the value of the oil captured by governments in those countries. So Britain can’t be directly compared with them. But among the top ten systems are Canada, Singapore and Ireland. There’s no reason why we shouldn’t aim for a better system than Canada’s, for example. Business is crying out for tax simplification – 79 per cent of directors want Income Tax and National Insurance fully merged for example. Our recent Towards 2020 paper How to abolish National Insurance shows the Government how it can merge the system without creating large groups of losers.

The 2020 Tax Commission’s final report The Single Income Tax outlines the complete overhaul of UK taxes that any Government intent on pushing Britain back up the tax tables. Radical reform would boost enterprise, create jobs and restore growth to our flat-lining economy. It’s time the Government got to work. Taxpayers deserve better than 16th best.

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