A tax manifesto for manufacturers

The report 'Tax reform for a balanced economy' from the manufacturers' organisation EEF, sets out fully costed reforms which it claims would provide an immediate boost to high-tech investment and innovation and create an internationally competitive tax system to help repair public finances. These include reforms to the system of investment allowances, a cut in corporation tax, an increase in VAT, and a return of the top rate of income tax to 40p. EEF warned that a failure to tackle a tax system that not only makes the UK uncompetitive but doesn't support manufacturing, will fail to help re-balance the economy and will lead to some companies moving their headquarters out of the UK. EEF director of policy Steve Radley, (pictured) said: "While there have been some helpful changes to the tax regime in recent years, we still lack a coherent tax system that encourages manufacturers to invest and sends the signal that they should be doing it here. The next government must think and act differently about how the tax system supports manufacturing and a balanced economy. In particular, it can achieve much larger benefits from any new measures if its approach is more predictable and transparent. "In the short term it means developing a modern, efficient tax system that helps to grow a diverse and dynamic manufacturing base. In the medium term, it means creating a more competitive tax environment to help reduce the number of hard choices we have to make when repairing the public finances. "A modern, competitive tax system would not only re-balance our economy but attract mobile multinational investment to the UK and send the right signal to would-be investors. The next government of whatever colour must make this a priority." EEF's proposals focus on twin priorities: immediate reforms to boost high-tech investment and innovation; and medium-term reforms to create a competitive tax system. The immediate reforms include the modernization of what EEF calls the antiquated capital allowances regime; improvements in R&D tax credits; and the creation of a more sustainable capital gains tax regime. In the medium term, it wants to see a cut the headline rate of corporation tax to 25p over the next five years; a rise in VAT to 20% and a signal that Britain is "open for business again" by returning the top tax rate to 40p in the pound. The call from EEF underpins similar urging from the recent IMechE/Findlay Media Manufacturing Summit which made 'Action on incentives and taxes' part of its Vote Manufacturing manifesto challenge to prospective MPs seeking a place in parliament at the forthcoming election (www.votemanufacturing.co.uk)