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Lower tax would encourage more business, says CBI

The Confederation of British Industry (CBI) has called for a cut in corporation tax in order to attract more global businesses to the UK.

The lobby group said high taxes on business are damaging the UK economy. A few years ago Britain had one of the most favourable corporate tax environments in the world but that has now deteriorated, it said.

With Chancellor Alistair Darling due to give his first Budget on Wednesday, the CBI wants corporation tax cut from 28% to 18% by 2016 and a simpler system.

Unions fear such a cut would lead to tax hikes for "ordinary people". But the CBI argues that cutting taxes would bring more global companies to the UK, meaning that overall tax revenues would actually rise.

According to a CBI report written by 12 leading tax experts, the UK has failed to match deep cuts made to corporation tax by nations like Italy and the Netherlands. It says since 1993 the main rate of UK corporation tax has been reduced by 5% to 28%, but Germany has halved its tax rate to 29.8% and the Netherlands has sliced off 9.5%, to 25.5%.

That means that the UK has slipped from fourth to sixth place in the ranking of EU nations with the lowest corporation tax rates.

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