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By Sally Watson, 2 March 2001 18:30

NEWS In a straw poll conducted by silicon.com, high-tech leaders warned that Britain's over complicated tax regime will never work for digital downloads. Cliff Stanford, founder of Demon Internet and the Redbus Group, said: "VAT doesn't work for ecommerce. At the moment we're in a mess and we need to sort it out so we can compete with the US." David King Lassman, founder of knowledge management company Connextra, claimed the scrapping of VAT on goods purchased online would substantially increase the volume of ecommerce in the UK. While Alexander Broich, UK MD at bol.com, called the current system idiosyncratic and discriminatory, pointing out that audio and digital books are subject to VAT while printed books are exempt. "This is a tax on format rather than product," Broich said, "VAT should be removed from audio books and digital formats." Brown's Budget speech on Wednesday is widely expected to be more political than economic. The Iron Chancellor has already given away concessions on fuel and pensions in his pre-Budget statement and observers expect to see more giveaways in the run-up to the election. But while industry campaigners admit they are unlikely to pressure the government into giving up ecommerce tax, they hope for more success with employee share schemes. "The current schemes for limited groups of managers getting tax breaks are divisive and counterproductive," claimed Alex van Someren, CEO of Cambridge-based security company nCipher. "All my employees are equally important to me and I find it shocking that a Labour administration would offer me an incentive to make my managers richer at the expense of everyone else." The 2000 Budget offered limited concessions, creating a number a government recognised schemes that offered higher tax breaks to staff. But most in the industry argue they are too restrictive, allowing only limited options over a long period of time. "Taxing employers and employees [on share options] is counter-intuitive and seems to contradict the government's resolve to be a friend to the technology sector," said King Lassman. Other popular requests from high-tech leaders included tax relief on schemes to get UK citizens online and extra tax breaks for start-up companies, small businesses and entrepreneurs. To read silicon.com's full pre-Budget analysis see: http://www.silicon.com/a43060