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Reform required for ‘slow killer’ of UK business

In a debate in Parliament on 11 July 2019, Baroness Neville-Rolfe called the complexity of the UK tax system ‘a slow killer’. In speaking to a motion to take note [a procedure used in the House of Lords to debate a subject without needing to take a specific decision], she said: “A key question is whether our tax system helps the economy to grow in both absolute and relative terms. Does it help with our international competitiveness at a time when we will need to trade more broadly? Are we encouraging the magic of digital growth and taxing it fairly?”

The tax system, according Baroness Neville Rolfe, a former Commercial Secretary to the Treasury, is ‘creaking under the weight of its own complexity’. She noted that the UK tax code is now up to an estimated 10 million words, double what it was in 2009.

She warned: “…the complexity of the tax system, when allied with a confusing and growing regulatory system in sector after sector, leads to the dampening of business growth, whatever the underlying strength of the economy. It is no coincidence that labour productivity has been so poor since the crash in areas such as financial services and energy, where there has been so much new regulation.”

Baroness Neville-Rolfe also highlighted the plight of the retail sector. The industry constitutes 5% of the economy but pays 10% of business taxes and 25% of business rates.

She welcomed the proposed digital services tax but said: “…it needs to increase quickly and be used to ease the burden of rates on the high street. It cannot be right that Amazon paid £4.6m in UK tax in 2017 and the beloved Marks & Spencer paid £98.3m.”

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