The Investment Management Association has said that the government must not be detracted from the need to reform the UK taxation system just because spending cuts are being implemented.
The IMA, which speaks on behalf of the UK’s £3 trillion fund management sector, called for the tax system to be changed in order to encourage more business investment for limited companies.
Some members and contractors are also calling for the government to introduce tax-free zones for equity investors in a bid to move away from an economy that relies solely on debt finance.
The IMA chairman, Dougie Ferrans, suggested that MPs might start overlooking tax reform if they focus too much on austerity measures. He said that as well as spending cuts the country also needs to come up with a long-term viable savings and investment regime.
He added that there needs to be a change in culture and incentives for investors if our manufacturing economy is going to be rebuilt on a meaningful scale. It will also be important to rebalance the economy by building up other sectors but Ferrans is concerned that the financial services sector will be diminished following the credit crisis.
He said that asset management is becoming increasingly global and London can no longer assume it has the right to monopolise that business. He went on to say that there needed to be a convincing case for asset managers to be UK based. Asia is our biggest threat. Companies will try and raise finance in markets where there is less regulatory complexity, he added.
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