Government announces framework for business tax

The government has published a draft framework intended to lay down a guide for creating business tax.

The framework is aimed principally at larger businesses and was drawn up following discussions held by the government's forum on business tax and globalisation, which launched in May 2008.

It sets out a series of principles that should inform the business tax regime. These include fairness, competitiveness and stability, along with efforts to make sure that new tax legislation doesn't impose extra burdens and complexities on firms.

The government committed itself to consultation wherever possible when developing tax policy.

The Prime Minister, Gordon Brown, and the Chancellor, Alistair Darling unveiled the framework at a global trade and investment conference in London.

Mr Darling said: "The UK is a good place to do business and we want to keep it that way. Businesses want certainty on tax. That's is why I have set out, in collaboration with UK business, the government's key principles for tax policy and how we will engage with business when developing tax policy."

Business groups broadly welcomed the draft framework, which is now open to feedback from the business community.

Ian McCafferty, the CBI's chief economic adviser, said: "The Prime Minister is right to highlight the attractions of the UK to international investors. The UK has a huge amount to offer.

"We welcome the government's recognition of the need to consult on business taxation, which will help avoid unintended consequences that are bad for the economy. It is also right to recognise the value of stability and certainty to business, which allow companies to invest with confidence."

However, Graeme Leach, chief economist at the Institute of Directors (IoD), while acknowledging the positives of the framework, worried that recent tax increases will undermine the UK's ability to attract foreign business investment.

Mr Leach commented: "We are pleased that the government is concerned about boosting inward investment, but if ministers want to make a tangible difference to UK competitiveness they should reverse the planned hike in National Insurance contributions and ditch the new top rate of income tax.

"Unfortunately there seems to be little recognition in the proposals that we need to get the tax burden down to attract foreign investors. In a global economy, you simply cannot beat the numbers. If other countries are cheaper, they win."