Reports call for taxation policy reform
(05 March 2007)

Two separate reports published today have criticised the government's taxation policies – in very different ways.

Whereas the Reform thinktank assesses the effect of taxation on improving society, accountancy firm Ernst & Young's corporate taxation report analyses the impact on Britain's competitiveness as an investment location.

The latter claims that companies are likely to move their headquarters away from the UK because Britain's taxation regime has become inefficient, confusing and complex.

It calls on the government to make clear future plans on taxation policy to prevent uncertainty from continuing to hinder Britain's competitiveness.

"While the latest figures show the UK is still a key investment location, it must be a concern to government that, particularly outside London, inward investment figures are declining," Ernst & Young's head of tax, Paul Davies, commented.

"Other countries and regions in Europe have stolen a march on the UK by offering fiscal incentives and tax breaks that are proving to be a great success."

Meanwhile the Reform report argues that public spending increases have created "new and growing divides in society" which need remedying quickly.

It says the young, middle-income earners and outlying regions have suffered especially under the New Labour tax regime, which it argues is driving up social inequalities rather than reducing them.

In order to resolve this situation the government should act to tie public expenditure to economic growth – rather than continue raising already historically-high taxation levels.

"The Treasury has the right analysis of the challenges facing the UK but absolutely the wrong answers," states Professor Nick Bosanquet.

"Heavy public spending increases have already gone a long way to mortgaging the future of a generation who will have to pay for enlarged public spending as well as for their own pensions and higher education."