Analysis By Sue Bonney Chief Operating Officer - Tax, KPMG

Sue Bonney: Legislation is increasingly complex and uncertain

The chancellor admitted in his pre-Budget report that 2005 had been "the toughest and most challenging year" for the UK economy.

Rising oil and commodity prices forced him to halve his growth forecasts.

But with public expenditure still expanding, Gordon Brown chose to try and reassure business by focusing on two themes: stability and investment.

For business, that translates into certainty and competitiveness.

Looking at the latter first, there was some welcome targeted tax reliefs in particular areas, notably Real Estate Investment Trusts (Reits), the film industry and research and development.

There also was some recognition of the impact of the evolving global business model. For example, the government gave a measured and pragmatic response to a recent EU ruling on insurance-related services.

Disadvantage

Of course, some sectors may feel hard done by. The extra tax burden borne by the oil industry will be significant.

And the decision to shelve reform of corporation tax after two rounds of consultation may also disappoint.

Some businesses... operate in the knowledge that their tax regime will be changed, but they do not yet know the full details

It was meant to address the issue of companies who plan to get round some of the unintended results of a very antiquated scheme of tax - a practice which is often perceived by Revenue & Customs officials as abuse.

In this respect, there still seems to be a certain lack of understanding of the global dynamics of business.

Limitations on a company getting relief for real commercial losses, or on the amount generally invested in the creation of intellectual property, are likely to put UK businesses at a disadvantage from overseas competitors.

Uncertainty

As for providing certainty for business, the disclosure regime certainly seems to work well for officials. It gives them early visibility of, and planning for, hallmarks of abuse.

What is urgently needed now is a similar mechanism to allow them to be equally reactive to changes in the global business environment. More balance is needed to enable businesses to evaluate investment plans.

Targeted avoidance against perceived abuses is welcome. It is better than some of the blanket provisions we have seen in recent years which have had far wider commercial consequences than originally intended.

But all this adds up to increasingly complex legislation - and uncertainty.

Again, some businesses may feel they have a rough deal. For example, leasing businesses continue to operate in the knowledge that their tax regime will be changed, but they do not yet know the full details.

But above all, business wants to know that the taxes it pays are being spent effectively.