CSR tax measures welcome but government must go further says business group
The Forum of Private Business is responding to the Government’s Comprehensive Spending Review (CSR) by calling on it to go further to create an even playing field on tax for small firms.
As part of the much-heralded spending cuts and policies to tackle the UK’s £893 billion budget deficit the Chancellor of the Exchequer, George Osborne, announced a number of measures on tax, as well as other plans related to enterprise such as employment, education and skills, export and inward investment.
The plans include a requirement for HM Revenue and Customs to find savings of 15% via new technology and other efficiency measures. The Forum is backing the departmental reforms providing they save money for small businesses as well as the Government by streamlining the UK’s complex tax system.
Last year the Forum’s ‘Cost of Compliance’ Referendum member survey found that tax administration is one of costliest bureaucratic burdens faced by small firms, leaving them with a bill of £1.8 billion per year. Only employment law and health and safety legislation cost more, at £2.4 billion and £2.1 billion respectively.
Other tax moves include investing £900 million in tackling tax evasion and fraud in order to claw back £7 billion in lost tax revenues. On tax avoidance, the Government is also requiring banks to sign up to the code of practice on tax payment – but the Forum is arguing that it should also pledge to pursue big businesses that flout their tax commitments.
“Some of today’s announcements on taxation were welcome, but for too long large companies have been able to exploit tax loopholes – such as Channel Islands VAT ‘low value consignment relief’ – and otherwise avoid paying tax at the expense of small firms,” said the forum’s head of campaigns Jane Bennett. “This simply has to stop if SME growth and job creation is to drive sustained economic recovery. The Government should clarify that, in addition to tackling tax evasion, clamping down on tax avoidance by large companies as well as financial institutions will be in its sights.”
In all, 61% of forum members taking part in its quarterly ‘Referendum’ survey ahead of the previous Budget called for tax simplification to be prioritised and 45% a fairer distribution of taxation. In further research carried out the forum 68% of small employers said the tax system is unfair, with 52% believing that larger firms have the resources to invest in tax avoidance schemes.
In relation to the other measures announced by the Government, 78% of respondents to Referendum called for the public deficit tackled as a matter of urgency, 29% wanted an improvement in the skills infrastructure and 36% wanted an improvement to the national transport infrastructure.
In June’s ‘emergency’ Budget, when the public sector cuts were first revealed, the Government announced tax proposals designed to boost business growth. For the first time in years, for example, small firms’ corporation tax was cut. However, this 1% reduction was considerably less than the fall in the higher rate paid by big businesses, which is being cut by 4% by 2014. Bennett said the Government should do more to prioritise the growth of small firms rather than pander to big businesses.
“At the very least we want to see the lower rate of corporation tax reduced at the same level as the big business rate,” added Miss Bennett. “But even if combined with a shake up of other cost barriers such as red tape and late payment this will not be enough to significantly stimulate small business growth and create the private sector jobs required following the 490,000. Bolder, more radical policies on tax and other barriers to small businesses must be introduced alongside these efficiency measures.”
In addition to closing loopholes and further corporation tax cuts she suggested extending the recently-announced National Insurance holiday given for the first 10 staff recruited by new start ups beyond a year and giving a similar NI break to established non-employers to help them create jobs.
Bennett also suggested reviewing supplementary business rates and other local taxes in development – such as workplace parking levies – ensuring they are introduced only with support of the local business community.