Time to tackle small business tax burden

At a crucial meeting with the Chancellor ahead of the Budget, the British Chambers of Commerce (BCC) is asking for reassurance that the tax burden on business will not be increased. Speaking ahead of the meeting, Bill Midgley, President of the British Chambers of Commerce, said:

“The big issue as the Budget approaches is the need to reduce the burdens on business in an increasingly competitive global economy."

"The days of British businesses just competing with each other are long gone. The reality is that many of our firms are now facing competition from the likes of China, India and other emerging economies."

“The Chancellor has an opportunity to create a better environment for British firms to do business, by not increasing the tax burden and instead offering incentives to encourage investment. In particular the Government should consider how the UK’s corporation tax rate could be reduced. Our current rate threatens to harm business competitiveness.”

Many OECD countries have been lowering their tax rates in recent years whereas the UK’s standard corporation tax rate of 30 per cent has remained static. The UK has dropped from having the 9th lowest corporation tax rate a decade ago, to now having the 16th lowest. This means that British businesses are paying 10 per cent more than the average for the EU’s 10 new member states and 5 per cent more than the average for the whole of the EU.

Mr Midgley concluded: “In the countries where the corporation tax rate has been reduced in the last five years, the vast majority have seen an increase in their total tax receipts, as more companies choose to invest.”

As the tax burden has increased in recent years, businesses have also seen an increase in the complexity of the tax system. BCC believes the Chancellor should announce targets and a corresponding timescale for reducing the administrative tax burden on business. In addition, as part of Her Majesty’s Revenue and Custom’s (HMRC) simplification agenda, the rules relating to National Insurance (NI) should be aligned with those that govern pay-as-you-earn (PAYE) income tax and NI should be placed on a cumulative basis.

Mr Midgley said: “Avoiding further increases in business taxation is not the only way to ensure the right support for businesses. We also need to see a reduction in the regulatory burden which now stands at £50bn since 1998, with targets and timescales announced for individual Government departments.

“We have very practical proposals. All are well within the Government’s capability to deliver, indeed some build on proposals already made by government. We hope the Chancellor will use this opportunity to help our firms their global challenges head on.”

Other areas in the BCC’s Budget submission include:

• Funding for business support and enterprise activities redirected to achieve greater value for money
• The R&D tax credit extended to cover firms’ expenditure on intellectual property
• The 2006 National Minimum Wage Rates to be reviewed
• Increase support for existing exporters through UKTI budget
• Better coordination between business and the various education providers, LSCs, the careers advice service and other stakeholders