The CBI today launched a scathing attack on the government’s corporation tax plans, claiming the economy will suffer if Chancellor Alistair Darling doesn’t radically overhaul the current system.

In a new report (http://www.cbi.org.uk/ndbs/press.nsf/0363c1f07c6ca12a8025671c00381cc7/c9f94d05d0d0975b80257403003c66a6?OpenDocument), UK business tax: A compelling case for change, the CBI argued that corporation tax should be cut to 18 per cent over the next eight years.

The Treasury will reduce the current 30 per cent rate by just two percentage points in April this year, but UK biz leaders reckon it needs to tackle the “ever rising business tax burden” by making a more daring cut.

The CBI warned that the current system could impact economic competitiveness with other countries.

Director general of the employers’ organisation Richard Lambert said: “Globalisation is a serious challenge to the tax system – as companies become more mobile, differences in tax regimes across the world are starting to matter more than ever before.

“Threats firms make to move their headquarters away from the UK are in no way empty – the government ignores them at its peril.”

The report also called for small and medium-sized businesses (SMEs) to be exempt from rules that it argued should only be intended for multinationals. “A small firms’ corporation tax rate [should be] brought back rapidly to 18 per cent within three years and the SME investment allowances doubled to £100,00.”

However, the Trades Union Congress (TUC) today slammed (http://www.tuc.org.uk/economy/tuc-14416-f0.cfm) the CBI’s report, describing it as a “tax dodgers’ charter”.

The TUC argued that if the CBI’s plans were given the go-ahead, ordinary people would suffer from tax hikes which in turn could lead to spending cuts on public services.

TUC general secretary Brendan Barber added that plans to end what he described as "favourable tax rates for small businesses", could also lead to a backlash. "The CBI might as well hang a giant 'tax is for the little people' banner from its office windows," he said. ®

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