HC Deb 20 February 1991 vol 186 cc260-1
5. Mr. Butterfill

To ask the Secretary of State for Trade and Industry if he will make a statement on the tax burden, including employers' social security contributions and payroll taxes, on British, French and west German companies, expressed as a percentage of gross domestic product.

Mr. Lilley

In 1988, the latest year for which figures are available, direct taxes on corporations and employers' payroll social security contributions were 8.9 per cent. of gross national product in the United Kingdom; 10.5 per cent. in west Germany and 17.2 per cent. in France.

Mr. Butterfill

Does my right hon. Friend agree that those gratifying figures go some way to explaining why business investment in the United Kingdom since 1979 has been higher than in either France or Germany? Does he further agree that we must keep those burdens down and reduce them further if we are to have continuing long-term investment in the United Kingdom?

Mr. Lilley

My hon. Friend is absolutely right. The lower burden on taxation on industry in Britain goes a long way to explaining why we have three times as much inward investment as France and six times as much as Germany. I cannot pre-empt the Budget judgments of my right hon. Friend the Chancellor of the Exchequer, but I agree that it is important to keep the burden of tax low. We remember all too well that the Labour party voted against a reduction in the corporation tax rate.

Mr. Alex Carlile

Does the Secretary of State agree that many industrialists complain justifiably about the amount of bureaucracy involved in collecting the taxes that they pay? Does he believe that we should make progress towards a unified tax and benefits system? Does he also agree that the reintroduction of enhanced capital allowances would enable industry to invest in itself in a more useful way?

Mr. Lilley

The Government considered in the 1988 Green Paper the unification of taxation and social security benefits and concluded that it simply was not feasible because the two were on different time scales and had different purposes. It would make the bureaucracy far worse if we unified taxation and social security benefits.

Sir Anthony Grant

Is my right hon. Friend aware that one of the most tedious tax burdens on very small firms is the absurdly low level at which they become responsible for value added tax? Will he continue, perhaps in conjuction with his colleagues and the Chancellor of the Exchequer, to make representations to the European Community to raise the level?

Mr. Lilley

I agree with my hon. Friend. He makes a good point. We have consistently argued with the EC that we should be allowed to raise the level further. We have set the level as high as possible under Community law, but there is a proposal in the works that would raise the level higher. That proposal has been made basically on our initiative, but it is grinding exceeding slow.