Brown's tax rises blunt Britain's edge

GORDON Brown is threatening Britain's economic competitiveness by increasing the tax burden on entrepreneurs, research has revealed.

But while Britain's tax rates are getting steadily higher, rival nations are reducing rates to attract businesses.

The research will be seen as further evidence of the effect of the raft of new levies on companies and individuals imposed by the Government since 1997.

The report appears in business magazine Forbes Global which publishes its annual 'tax misery' index to help entrepreneurs decide where it is best to set up a business.

It measures the top rate charged for corporation and income tax. Then it adds them together, plus further taxes including those on property, social security payments such as National Insurance and VAT to get a score - the lower the better.

Britain's rate is reached by adding together corporation tax at 30%, income tax at 40%, National Insurance paid by the employer at 13%, National Insurance paid by the employee at 11% and VAT at 17.5%. The figures are then rounded by Forbes.

According to the report, the tax burden in the UK has 'spurted back' from a score of 109.3 in 2002 to 111.3 this year. Of 26 countries which were included in previous surveys, Britain is one of only four where the burden has risen.

France maintained its position at the top of the index with a score of 179.4 - down from 181.2 in 2002. Belgium in second place scored 153.1 - down from 164.2.

But Forbes detects 'an important change in the index for the UK. For the first time, and surprisingly, it is rising by more than France's is decreasing'.

Critics blamed the recent rise in National Insurance for this development.

The CBI calculated that the tax burden has climbed by £ 6bn a year since 1997. Doug Godden, CBI head of economic analysis, said: 'With many other countries cutting taxation it's even more important that the Government here stops this erosion of our competitive position.'

Ruth Lea of the Institute of Directors said: 'We have been saying things are getting worse in this country for a long time. And things are only going to get worse because Gordon Brown refuses to change direction. It is all going worryingly wrong.'

The UK scores better than most of Europe, including Germany, Italy and Spain, but worse than the US apart from New York. It finishes 29th out of 51 in the index.

America's competitive lead on the UK will increase once President George Bush's tax cuts come into force in 2006.

Hong Kong, though now part of China, has the lowest score, at 43. Some former communist countries such as Russia and Lithuania have better tax scores than both America and Britain.

Others with a better record include Ireland, Australia and India. But Forbes says: 'Tax is not the sole factor in choosing a corporate or personal location.'

Figures on the overall tax burden show that in the UK taxation as a percentage of national wealth went from 30.4% in 1965 to 37.4% in 2001.

The data from the Organisation for Economic Co-operation and Development shows that in the US over the same period it went from 25% to 29.6%.

Forbes Global is the international edition of Forbes Magazine, published by US billionaire Steve Forbes.

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