Chancellor George Osborne needs to carry out an “ambitious” tax reform agenda in his Budget on Wednesday, the Institute of Directors (IoD) has said.
Simplifying the “painfully complex” tax system would allow him to “deliver an investment-boosting Budget”, said IoD director Simon Walker.
In May, a survey of IoD members said the new Conservative government should give priority to reducing the deficit.
But the IoD now says that alone is not enough.
“IoD members continue to support the chancellor’s priority of eliminating the annual fiscal deficit by the end of this Parliament, but this commitment alone would not be viewed by business as a successful Budget,” the IoD said.
“The chancellor must be ambitious in his tax reform agenda in order to create an ‘equity economy’, in which simple and sensible taxes on wealth and easy-to-understand investment tax breaks encourage more people to buy shares in entrepreneurial businesses.”
The IoD called on the chancellor to enact a series of reforms, including changes to inheritance tax and capital gains tax.
It said there should be a consultation on merging the two taxes, to remove the possibility of double taxation.
It also urged the government to raise the annual investment allowance from £500,000 to £600,000, “to help businesses plan longer-term investment projects”.
“The chancellor has the opportunity to deliver an investment-boosting Budget, making it easier for businesses to raise capital and promoting investment in the private sector,” said the IoD’s Mr Walker.
“The painfully complex system of unreliable allowances and competing or overlapping schemes makes it harder for business to take long-term investment decisions.
“For individuals, the process of investing is daunting, meaning many do not even consider it an option.”
Mr Walker said the chancellor needed to make sure the tax system “promotes investment and is easy for both individuals and business to understand”.