Tax and red tape 'driving firms out'

LONDON - Britain's high tax rate and complex regulations are putting firms off doing business here, a top business lobby group said today.

The Confederation of British Industry said the tax burden on firms had increased by £59 billion ($170 billion) since the Labour government came to power in 1997 and warned the UK risked losing out to countries with lower tax rates such as the Republic of Ireland.

"Current corporate tax levels are unsustainable until companies start generating more revenues outside the UK, or corporation tax must come down," CBI Director General Richard Lambert told a press briefing.

"There will have to be some changes in the near term."

Britain's top corporation tax rate, at 30 per cent, is more than double that of the Republic of Ireland, but much lower than some of its European neighbours, according to OECD data.

Firms have complained about the pressure on profit margins from rocketing energy and raw materials costs, and government red-tape has added to their woes.

Lambert said that had already driven some firms out of the country and more could follow as Britain loses its shine as a place to do business.

"Some companies see it as a serious problem and they're considering addressing it ... a lot of companies are relocating to Dublin."

His comments came after London-based banking giant HSBC said it could cut its tax bill by 400 million pounds a year if it left Britain, although it noted the regulatory environment here was important.

"I'm not suggesting we should have a tax rate of 12.5 per cent, but we should recognise this is a very competitive space," Lambert said.

- REUTERS