Thursday, March 22, 2007

Small Businesses RIP


We blogged Gordo's extrordinary attack on small businesses yesterday. And even now the dust has settled a bit, it looks no better.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountant says:

"This is a very surprising budget from a chancellor who claims to be a friend of enterprise. It seems to be a case of robbing small business Peter to pay big business Paul."

The chancellor presented the move as a crackdown on tax avoidance. He said the measure would discourage individuals from "artificially incorporating as small companies" by reducing the difference between small company rates of tax and the self-employed, who pay income tax. "I was bowled over by the wording of this," Mr Roy-Chowdhury said. "It is presented as a means to prevent tax avoidance. But it is a pure tax increase on small companies."

What on earth was Gordo playing at? The move will raise £0.8bn pa, but that's a mere speck in terms of his wobbly finances.

And what exactly was all that stuff about preventing tax avoidance? I've yet to understand how that's meant to work, given that he's increasing the small business rate to 22p at a time when the personal tax rate is being reduced to 20p. If anti-avoidance was the aim, wouldn't you have expected him simply to align the two?

And just when he's introducing highly desirable flat (er) tax simplification moves elsewhere (eg the cut in the Corporation Tax rate funded by abolishing various allowances), it makes absolutely no sense to be travelling in the opposite and wrong direction on small company taxation (ie a higher rate, supposedly offset by a complicated new system of capital allowances).
The teeth grinding conclusion must be that despite all his rhetoric about small business being the seedcorn of future prosperity etc, he really has no idea how it actually works, and doesn't really care. All he knows is that unlike those vociferous footlose BIG businesses, small businesses are most unlikely to move abroad. He figures they're at his mercy.

It is shameful and highly damaging to the economy and employment. And it's something even the timid Tories should surely oppose loudly. Perhaps the historically excellent Nick Herbert, who now happens to be brother Tyler's MP, could nudge George's elbow.

Right now.

This morning.

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