THE BRITISH ECONOMY is over-taxed, with a tax burden 18% higher than the global average, according to research published today by Top 50 firm UHY Hacker Young.
The relatively high effective rate of a third of GDP (32.9%) runs the risk of impeding growth, the report found. The global average stands at 27.8% of GDP, with the UK comparing poorly to other developed economies including the US at 25.4% and Ireland at 28.3%. Japan stands ahead of the UK at 29.5%.
The UK does, however, have the beating of most of its European neighbours, where around 40% of the economy is given over to government.
UHY Hacker Young warned high tax takes can prove a disincentive to investors, hitting wealth-creation and encouraging large firms to gravitate towards lower tax bases elsewhere.
UHY Hacker Young tax partner Roy Maugham said that unless the UK addresses its “weighty” tax burden, the British economy could find itself under pressure from both lower tax Eastern European countries that are able to offer equally strong manufacturing skills bases and global cities like Singapore, Dubai and Qatar, which are “consciously targeting the industries that create the most wealth”.
He said: “While our tax burden compares favourably with some of our Western European neighbours, increasingly, that is not where the most intense competition is coming from. It needs to be a clear ambition to make our economy globally competitive by keeping a close eye on the overall tax take – perhaps even setting a specific target.”
“That will need to be balanced by greater efforts to ensure that spending on the public sector delivers the best results for its customers.”
“How much tax is too much ought to be discussed much more openly during the election campaign.”