Adam Creighton

Taxing the patience of business

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The Chancellor’s claim that his Budget provides a stable tax regime for business is absurd. Far from providing a stable tax regime, Labour has repeatedly tinkered with the system, increasing confusion and weighing down businesses with paper work, retarding business creation.

The government has changed corporate tax rates in seven of its 11 years in office. Such constant fiddling has more to do with looking dynamic than any desire to provide a sensible tax policy. And don’t be under the impression that there is a single rate of corporate tax: that would be much too simple! The government currently treats companies like people and taxes them more as they earn more. Apparently, Labour’s business-friendly ethos extends to taxing companies more for being successful.

Not only has the government changed tax rates constantly but it also introduced a third, 10 percent band of corporate tax in 2000, only to withdraw it in embarrassment in 2005: this so-called reform did little more than encourage a lot of people who were already in business to become legally incorporated.

Then there’s the new 18 per cent capital gains tax, the latest centrepiece of New Labour dynamism. Labour abolished a more economically sensible system of inflation-indexing when it came to power and introduced in its stead a new system that ensures that different assets are taxed at different rates at different times. Darling’s latest reform doesn’t even attempt to account for inflation; meaning individuals pay tax on a general increase in prices!

In reality, this government has presided over one of the more unstable business tax regimes in the developed world.