Government proposals to let local authorities levy additional business rates have come under fire from a leading Sussex business organisation.

In its response to a Government green paper, the Sussex branch of the Institute of Directors said the tax could see businesses, large and small, paying an extra five per cent on top of the national rate.

Although the new tax would be variable, the branch pointed out that political pressures were such the variation would nearly always be upwards, leading to increased tax burdens on business.

Sussex branch chairman Michael Evans, who represents more than 1,700 business people in the county, said: "Rates are already a heavy tax burden on top of all the other taxes on business. They should certainly not be increased.

"The Government is wedded to the idea of increasing local authorities' financial autonomy at the expense of business and taxpayers generally.

"That policy will backfire when businesses close and local economies suffer."

While businesses should not be put at risk of higher rates, the IoD in Sussex said local authorities should be allowed to give rebates on the national rate.

Rebates could then be used by local authorities to encourage businesses into Sussex. Designating certain areas as rebate zones could help to rejuvenate town centres. As the virtues of a low tax approach became apparent local authorities would compete for business investment.