UK slips two places to 16th in global table for business tax

Britain has slipped two places down a league table of business tax systems published by the World Bank, in spite of George Osborne's flagship policy of increasing tax competitiveness.

Norway and Macedonia overtook the UK, which fell to 16th place on the annual benchmark of 189 business tax systems, which measures the tax costs and compliance burden for a medium-sized manufacturer.

Britain remains in third place in a ranking of the world's 20 largest economies for ease of paying tax, after Saudi Arabia and Canada. The results are in a report on Paying Taxes by PwC, the professional services group, and the World Bank.

Mr Osborne, the chancellor, has set a goal of creating the most competitive corporate regime in the Group of 20 leading economies, although he has not specified his measure of success.

The Treasury, which plans a further corporate tax rate cut to 20 per cent next year, has insisted it was on track to meet the goal set out in the coalition agreement "to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries".

The total tax rate, including labour, corporate and other taxes, paid by businesses in Britain fell by 0.3 percentage points to 33.7 per cent, largely because of a reduction in the rate of corporation tax. The time taken by businesses to prepare, file and pay the taxes was unchanged at about nine days. Other countries reduced the time taken to comply with tax rules, which fell on average by four hours to 11 days.

Across the world, profit-related taxes rose for the second year in a row, countering suggestions of a "race to the bottom", the report said.

Kevin Nicholson, head of tax at PwC, said: "The UK has a competitive tax system but other countries are upping the ante on reform. We can't sit still if the government is to make the UK the most competitive tax system in the G20."

Oil-rich states and low-tax countries such as Hong Kong, Singapore and Ireland dominated the top of the league table. The research measures the ease of paying taxes in different countries for a hypothetical manufacturer of flowerpots that employs 60 people.

Andrew Packman, tax partner at PwC, said: "UK businesses are unlikely to think their tax compliance burden is light but when you look around the world it's clear things could be a lot worse. One of the attractions of the UK is the ease of paying taxes and there is still plenty of scope for further streamlining."

The Treasury said the government had made significant progress in making Britain's tax regime more competitive, adding "corporation tax will fall to 20 per cent in 2015, giving the UK the joint lowest rate in the G20".

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