Manufacturers in the West Midlands are warning that the British tax minefield is wrecking the country as a competitive location.
At issue is the increasing level of tax and the complexity of the taxation system, the engineering employers? federation EEF said.
The warning is sounded in an EEF report on tax which puts forward alternative approaches to those aspects of the current tax system which, it says, are damaging manufacturing competitiveness the most.
The report follows the recent announcements of a new business research tax centre at Oxford University?s Said Business School and a Conservative Party commission to look into simpler, fairer and flatter taxes.
Ian Smith, chief executive of the EEF in the West Midlands, said: ?Our long-held competitive advantage on tax is starting to erode. ? The UK?s tax burden has been rising while it is falling in many other countries which are actively designing their tax systems to attract high value manufacturing.
?The West Midlands knows more than most the need for the UK to be a competitive location for manufacturing.
?The Government has done a lot to actively promote innovation and improve skill levels, but they do not seem to realise that rising costs and complexity of the business tax system is preventing companies from taking full advantage of this to improve their performance.?
With UK manufacturing profitability falling in six of the last seven years, companies are hit disproportionately by increases in ?input? tax and find it difficult to pass on increased costs to their customers, Mr Smith said.
?Any further increase in taxation will make it ever harder to break out of the cycle of weak profitability and low investment.?
According to the EEF report, companies will pay an additional #2.2 billion in corporation tax and an additional #5.5 billion in other imposts in 2005/6.
Some of the increase is due to new input taxes on business such as the Climate Change Levy. Between 1997 and 2006, only a small handful of OECD countries will have seen a greater increase than the UK in their tax burden.
During the same period, the US, most large EU countries and the newly-acceded members of the EU have seen their tax burdens fall.
Tax is second only to regulation as a negative influence in assessing the competitiveness of the UK as a business location.
The EEF goes on to argue while the Government has acknowledged the need to cut red tape for business, the sheer magnitude and complexity of the current UK tax system remains difficult and costly to navigate.
West Midland members are calling on Chancellor Gordon Brown to avoid any further increases in the business tax burden in his forthcoming pre-Budget statement.
EEF West Midlands represents mainly engineering, manufacturing and t e c h n o l o g y - b a s e d organisations.