Scrap small business tax rate, says CBI

Alistair Darling is facing pressure to cut business taxes and simplify the tax regime, ahead of his first Budget as chancellor of the exchequer.

The Conservative Party has called for a reduction in the rates for both smaller companies and larger firms.

Shadow chancellor George Osborne said that the main rate of corporation tax, which is already due to be cut from 30% to 28% on 1 April, should be reduced further to 25%. He also argued that that a planned 2p rise in the tax rate for small companies should be abandoned.

"A decade ago we had the fourth lowest business tax rate in Europe," said Mr Osborne. "Today we have the nineteenth lowest. It is a millstone round the neck of British firms."

Manufacturers group EEF has also called for the main corporation tax rate to come down to 25%, while the Confederation of British Industry (CBI) has published a report which argues for a reduction to 18% by 2016.

The CBI report envisages a "radical overhaul" of business taxes, and sees the reduction "more than paying for itself over time through increased economic activity".

It says that the small business rate should be reduced to 18% within three years, and should be scrapped altogether once the headline rate that has come down to the same level.

However, the CBI report has been branded a "tax dodger's charter" by the TUC.

"Their plan to end the favourable tax rates for small business is likely to provoke a backlash from small business organisations," said TUC general secretary Brendan Barber.

The Budget will be presented to parliament on Wednesday.