Britain’s tax system is in need of a ‘radical overhaul’ according to the Confederation of British Industry (CBI).

The lobby group claims that high business taxes are ‘damaging the UK economy’ and is thus calling on Chancellor Alistair Darling to cut the rate of corporation tax from 28% to 18% by 2016.

The business think tank is also urging the Government to set up an independent commission to review the current tax rules.

A CBI report compiled by 12 leading tax experts suggests that a revamp of existing tax legislation would help stimulate business growth and inject life into the country’s ailing economy.

CBI director general, Richard Lambert, said: ‘Our traditional tax system is no longer fit for purpose. We need bold action to restore a competitive headline rate of corporate tax.

‘A radical shake-up is also vital if clarity, certainty and simplicity are to be reintroduced to the system so firms can make Britain their long-term home.’

Shadow Chancellor George Osborne has also urged Darling to use his debut Budget to deliver a cut in business taxes.

‘I am suggesting a simplification of the system, getting rid of the very expensive reliefs and allowances that exist within the corporate tax system, and using the proceeds to cut the headline rate,’ Osborne told the BBC.

Meanwhile the Trades Union Congress has condemned the CBI’s proposed reforms, claiming that they would lead to ‘tax hikes for ordinary people’.