CBI argues for a "competitive" tax system

In 2010-11, businesses paid more than a quarter of the total UK tax take of £551bn.

David Cameron at the CBI annual conference in London. Credit: Getty Images.

UK businesses pay around a quarter, £163bn, of the country’s total tax revenue, and a competitive tax system is essential to the economy and prosperity, John Cridland, director-general at the Confederation of British Industry (CBI) argued in a speech today.

Launching a new report titled Tax and British Business: Making the Case, Cridland said that:

UK businesses need to be competitive on the world stage and are perfectly entitled to operate in low-tax jurisdictions for legitimate business purposes.

The report shows why a balanced and proportionate tax regime is needed to allow business to continue to grow the UK economy and contribute to society, and is about bringing an informed voice to the UK business tax debate.

Out of business’ total contribution in 2010-11, 26 per cent (£42bn) was from corporation tax, the rest being paid through a number of other taxes. The report also shows that a UK business pays more corporation tax than businesses in many of its competitor countries, even those with a much higher rate.

In the current era of austerity there is also a great deal of concern that businesses either abuse the system or even evade paying their proper contribution. While it is important to have a debate about business tax it is vital that that discussion is based on facts and on an understanding of the whole purpose of the tax system, rather than on misinformation, misunderstanding or prejudice.

In his speech, Cridland made clear that an important distinction had to be drawn between transparent low-tax jurisdictions and ‘tax havens’ that hide behind secrecy, adding that:

Tax has become a more important issue for most companies and is often now on the agenda of the board of directors. . .

Taxpayers have to work out how much tax they are legally obliged to pay according to the combination of some long-established principles in the statute and other measures including incentives or penalties which change more regularly. Not only is the management of tax costs permitted by law, it is often directly encouraged by government incentives. . .

The UK government has announced its intention to construct the most competitive regime in the G20 to encourage companies to invest and stay in the UK. This does not just mean a competitive headline rate of corporation tax, but includes the use of other incentives to ensure the UK tax environment is attractive to business. However, tax competitiveness is important to governments, and to the national economy. If certain tax incentives give the UK a competitive edge, then the UK benefits.