Brown urged to address UK tax climate

The firm said the chancellor’s second term in office should be dedicated to making the tax system ‘as easy as possible to live with’ and suggested that the next parliament be devoted to the simplification of the corporate tax system.

In a document entitled ‘Keeping Britain competitive’, the firm recommended the government continue with its policy of keeping corporate tax rates among the lowest in the EU, as well as introducing a lower tax rate on manufacturing profits, a sector expected to receive significant direct foreign investment.

The ultimate aim should be a ‘zero rate UK’ it said, which would ‘potentially encourage huge amounts of investment’. However, E&Y warned that moves to abolish of corporate taxes would not be well received by the EU or the OECD.

Other recommendations included investment in skills in sectors where capital is most mobile; tax relief for companies offering value added activities as part of restructuring their businesses; the resolution of the double tax relief system; and a special regime for intellectual property companies.

Heather Self, international tax partner at E&Y and author of the report, said the UK attracted a significant share of inward investment into Europe and it was vital for the country to defend its ‘enviable position’.

‘The UK tax system can act as both a barrier and an enabler of international competitiveness,’ she said.

Self described the UK tax systems as ‘complex as any in the developed world’ with features that had ‘both a positive and negative impact’ on those that invested in the country.

She said it was not just tax rates, but the entire tax climate, which mattered.

‘The overarching message to government is to cut the tax costs of operating in business and, above all, to make the tax system and its administration simple, clear and certain.’


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