Britain to slide down tax rankings after hikes, warns Thatcherite think tank

Britain risks falling behind its international rivals if it imposes a more punitive tax regime.

The combination of the new health and social care levy, hiking corporation tax and withdrawing the super-deduction will push the UK down to 30th out of 37 rich nations for tax competitiveness, research by the Thatcherite think tank the Centre for Policy Studies (CPS) has found.

After the tax hikes are live, Germany, Canada, the US and Japan will have more welcoming tax regimes.

The UK will also be within touching distance of France and Italy after the fresh round of higher taxes are live.

The research comes as figures from the Office for National Statistics (ONS) show borrowing came in far lower than the government’s fiscal watchdog forecast in March, giving the Chancellor more fiscal wriggle room ahead of the budget next Wednesday.

Borrowing in September was around 16 per cent lower than the Office for Budget Responsibility predicted.

Sunak is not expected to use the windfall to loosen fiscal policy to ease the burden on households and businesses at the budget, instead opting to reportedly hold back tax cuts in the run up to the next general election.

Martin Beck, senior economic advisor to the EY ITEM Club, said: “We expect the budget to be devoid of measures that would significantly ease the fiscal squeeze that households and firms are set to endure over the months ahead.”

The CPS warned the government not to push ahead with its planned tax hikes to stimulate economic growth.

Tom Clougherty, head of tax at the CPS, said: ‘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.”