Tax hikes dragging down UK economy

TAX hikes are making Britain less competitive and holding back the economy, the Chancellor has been warned.

As Rishi Sunak prepares for next week’s Budget and Spending Review, a report by the Centre for Policy Studies shows the UK is sliding down the global rankings for competitive taxes.

The UK is ranked 22nd out of 37 OECD nations in the International Tax Competitiveness Index published by the US-based Tax Foundation. But the CPS warns we will fall to 30th in 2023 after corporation tax jumps from 19pc to 25pc and the introduction of the new health and social care levy.

Tom Clougherty, head of tax at the think tank, said: ‘The UK’s tax regime is already significantly less competitive than is generally realised. But our analysis also shows how much worse the planned tax rises will make things. The UK cannot afford to fall behind its international competitors – especially amid reports of increasing scepticism towards the UK as an investment environment.

‘The Government needs to rethink its plans, and put growth, investment and competitiveness at the heart of its agenda.’

Daniel Bunn of the Tax Foundation said: ‘The UK is at a critical juncture with its tax policy. The levelling up agenda could be curtailed by tax hikes.’

With the tax burden in the UK heading to its highest sustained level in peacetime, business leaders also called for a rethink.

CBI director general Tony Danker said: ‘Are we going for growth? Or going back to tax and spend? There is a fundamental inconsistency where the Government wants to unlock business investment, but its tax policies do the opposite. Tax growth stunts investment.’