A FLOOD of companies could leave the UK and relocate to lower-tax countries if corporation tax is not lowered, the Director-General of the CBI said yesterday.

Richard Lambert said that a number of companies had already left Britain to set up headquarters elsewhere. He said that others may follow the example of Google, which recently established its European headquarters in Dublin, where corporation tax is 12.5 per cent. In Britain it is 30 per cent.

“Corporation tax has to come down,” he said. “A trickle of companies is relocating and our worry is that it might turn into a flood.”

Mr Lambert said that the present corporation tax rate was “unsustainable” because it was much higher than those of European competitors. “Compared to the rest of Europe, the burden of taxation is rising in the UK at the same time as tax collection has become noticeably more aggressive.”

Business has become more concerned about tax issues since the merger of the Inland Revenue and Customs and Excise. The CBI believes that the tax authorities are taking a much tougher approach to scrutinising tax compliance and collecting payment.

Ian McCafferty, the chief economist with the business organisation, said that there was a recognition from the Government of the “complexity and hostility in the tax environment”, although he said that there were not as yet any suggestions on what could be done about it.

“It is no longer a partnership. Now we find that there is a great deal of confrontation,” Mr McCafferty said.

Mr Lambert said that the CBI’s complaints were nothing to do with the high-profile campaigns waged against tax avoidance or the Revenue’s action on “fancy accounting” but about regular tax management conducted by businesses.

According to the CBI, companies have been charged an extra £59 billion in taxation and regulation since Labour took office in 1997.

Mr Lambert, who has been Director-General for 100 days, said that tax was one of the main concerns raised by companies when he has visited them after taking on the job.

He said that he had encountered little appetite for tax cuts while touring the recent party conferences, but that political parties would have to consider cutting business taxation to improve Britain’s competitiveness. He said that the CBI was not suggesting that the UK reduce its tax level to that of Ireland’s, but that the level must be examined in relation to the tax level in other European countries.

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