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As the coalition government enters its second year, business organisations are calling on ministers to reduce the tax burden on small and medium enterprises (SMEs).
Tax rates did not become significantly lighter during the first 12 months of the Con-Lib administration and the fiscal responsibility of firms remains greater than the corporation tax rates of 20% and 26% suggest, according to the Institute of Directors (IoD).
In a new report, Tax – the Weighty Burden 2011, the IoD claims SMEs suffer true tax rates of between 32% and 43% as a result of additional levies including employers’ National Insurance, business rates and road fuel duty.
‘There is limited scope for radical cuts in the short term, but [the government] should lay plans now to reduce this heavy burden sharply in the medium term,’ said the institute’s head of taxation, Richard Baron.
‘Plans to reduce corporation tax rates need to be much more ambitious than they currently are, and the rate of employers’ National Insurance contributions also needs to come down.’
Employers’ NI contributions (NICs) are also the target of the Federation of Small Business’s (FSB) ire; the pressure group has published figures that suggest small firms would employ additional staff members if the tax’s rate was lower.
Almost a third (31%) of respondents to an FSB survey of more than 1,700 businesses said reducing NICs for the first six months of an individual’s employment would encourage take-up of extra workers, and 11% said extending the NICs holiday scheme would be an incentive.
The FSB said the NI break, announced in the coalition's first Budget, for start-ups that take on up to ten employees does not go far enough, and it repeated its demand that the government extend the scheme to existing firms that take on up to three new employees to add to a workforce of four or fewer.
