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Small business taxation still too high says IoD

Small business taxation still too high says IoD

The Institute of Directors has criticised the coalition for failing to reduce the burden of tax on small businesses. Tax – the Weighty Burden, the annual report from the Institute, calculates that the true burden of taxation for SMEs is between 32% and 43%.

This burden is unlikely to reduce even when corporation tax rates decrease in 2014 because employers have to pay additional fuel duty, national insurance and business rates.

The head of taxation at the IoD, Richard Baron, said the burden of taxation is weighing growth down. Although it is not possible to make radical cuts at the moment, the government should already be making plans to reduce the heavy burden of business taxation.

Baron believes corporation tax needs to be lower than originally planned and employers’ NICs should also be reduced.

However, a recent report from the TUC suggests that cutting corporation tax further would have an adverse effect on the economy and job creation.

George Osborne believes that reducing the rate of corporation tax will entice companies to set up in the UK, which will help drive the recovery in the private sector. But Brendan Barber, the TUC chief, says this argument does not stand up.

The rate of corporation tax in the UK is already amongst the lowest in Europe. The OECD average is 26.5%, but in excess of 90% of small businesses in the UK pay 20% and the average for large organisations is 23.2%.

Barber said that we have extremely competitive corporation tax rates already. He went on to point out that some people, including Osborne, have been talking about emulating the aggressive low tax policies of Ireland, but the current economic problems there suggest that this is not a sensible option.

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Image: Scale-A-Week: 14 March 2010 by puuikibeach

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