Britain Drops in OECD Tax Rankings
Britain has fallen five places to 25th among 38 OECD nations in global personal tax competitiveness following Chancellor Rachel Reeves’s £25bn tax raid last year.
The Centre for Policy Studies (CPS) report blames the sharp fall on the increase in employer National Insurance contributions and a rise in capital gains tax, warning that the UK’s tax system is becoming increasingly anti-growth and uncompetitive.
Nations such as Costa Rica, Chile, and Portugal now rank higher than the UK for personal tax competitiveness a stark indicator of how far Britain’s fiscal appeal has weakened among developed economies.
Economists Warn Against More Tax Hikes
Daniel Herring, an economist at the CPS, cautioned the Chancellor against using the upcoming November Budget to raise further taxes on employers or investment.
“The UK’s continued lack of tax competitiveness would be a concern for any Chancellor ahead of a Budget where tax hikes are widely mooted,” he said.
“Rachel Reeves should resist the urge to crank up pressure on businesses and instead learn from our international competitors.”
The report argues that the current system discourages enterprise, investment, and job creation areas vital to addressing the country’s persistent productivity challenges.
Broader Tax Competitiveness Weakens
The UK also performed poorly in other categories, ranking 28th for corporate taxes and second from bottom for property taxes, resulting in an overall ranking of 32nd out of 38 OECD members.
Analysts say this pattern signals a systemic decline in competitiveness, with complex tax rules and high rates deterring both foreign investment and domestic expansion.
The Office for Budget Responsibility (OBR) is expected to further downgrade Britain’s productivity forecasts, potentially widening the fiscal gap that Reeves must address in her upcoming Budget.
Industry Voices Fear Economic Fallout
Business leaders have warned that further tax rises could stifle growth and hurt consumers.
Steve Heapy, chief executive of Jet2, said additional levies could “screw middle England,” raising holiday costs and weakening the pound.
“Any tax burden will be put on the people in the middle the squeezed middle and possibly companies who will pass on cost increases,” he said.
Heapy also cautioned that an adverse market reaction to the Budget could push up borrowing costs and devalue sterling.
Opposition and Market Pressure
Andrew Griffith, the Shadow Business Secretary, echoed these warnings, urging the Chancellor not to overburden taxpayers.
“Labour must not come for Brits’ holidays as well as their pensions, homes and savings,” he said.
“Rachel Reeves needs to put the public sector on an Ozempic diet and avoid further hiking taxes.”
Economists and business groups alike argue that the Government risks driving talent and capital abroad if it prioritises short-term revenue gains over long-term growth stability.
Treasury Defends Fiscal Approach
In response, a Treasury spokesperson said the Government’s policies aim to balance fiscal responsibility and economic growth.
“The Budget will strike the right balance between funding public services and boosting living standards,” the spokesperson said.
“We have capped corporation tax and protected business rates relief for retail, hospitality and leisure, helping 250,000 businesses across the UK.”
Officials maintain that Reeves’s fiscal approach is designed to stabilise Britain’s finances after years of high borrowing and ensure the tax burden is “shared fairly” across society.
A Balancing Act Ahead of the Budget
With less than a month until the Autumn Budget, pressure is mounting on Reeves to restore confidence among investors and businesses without derailing Labour’s commitment to fairness and fiscal discipline.
The UK’s slipping global tax position underscores the tightrope the Chancellor must walk between funding essential services and keeping the nation competitive in a fragile global economy.
