Tax and competitiveness

garye · Tax and competitiveness

Interesting article below (particularly last paragraph) on tax and international competitiveness.

http://business.guardian.co.uk/story/0,,1881634,00.html

UK slips and US falls in competitiveness league

Ashley Seager and Larry Elliott
Wednesday September 27, 2006
The Guardian

The British economy has slipped down the world league in terms of competitiveness but remains in the top 10 for the second year running, an authoritative annual survey from the World Economic Forum showed yesterday.

Britain is in 10th place - down from ninth last year - while the United States has fallen from first to sixth.
Augusto Lopez-Claros, the forum's chief economist, said the British economy scored well for the efficiency of its goods markets, while its financial markets were world leaders. "One area that needs improvement is the physical infrastructure - railways, airports, electricity supply. Public debt levels have also gone up and the pound has been unusually strong, leading to a drop in competitiveness for the export sector," said Mr Lopez-Claros.

The report recommended that Gordon Brown should rein in the government's public deficit if the chancellor wanted to ensure that Britain remained in the top 10.

It said Britain ranked very highly for business sophistication, but needed to improve government procurement of advanced-tech products, and boost research and development spending and the availability of scientists and engineers. Businesses complained of being held back by poor worker skills and what they saw as over-regulation and high tax rates.

Commenting on the US slide down the rankings, Mr Lopez-Claros cited concerns over economic management and the business environment.

The business survey pointed to concern about "wastefulness" in public spending - a particular reference to the big rise in defence and homeland security spending.

"With a low savings rate, record-high current-account deficits and a worsening of the US's net debtor position, there is a non-negligible risk to both the country's overall competitiveness and, given the relative size of the US economy, the future of the global economy," the report said.

The top four economies in terms of competitiveness are now Switzerland, Finland, Sweden and Denmark. Mr Lopez-Claros noted that these countries did not conform to a low-tax, low-spending model. Singapore remained in fifth place.