Taxes still weigh heavily on businesses, says IoD

The real tax burdens on business are much heavier than just those imposed by corporation tax, the Institute of Directors (IoD) has said.

Current corporation taxes are 20 per cent and 26 per cent, but, the IoD claims, as far as SMEs are concerned, actual tax charges range between 32 per cent and 43 per cent.

In its report, entitled Tax - The Weighty Burden, the employers' group argued that business taxes have grown no lighter during the first year of the Coalition Government.

Even taking planned corporation tax cuts into account, the IoD maintained that the reductions will do little or nothing to help smaller firms.

The reason for this is that corporation tax amounts to only part of the story. There is a number of additional burdens to factor in, including employers' national insurance, business rates and road fuel duty.

Richard Baron, head of taxation at the IoD, pointed out that, although there is limited scope for radical cuts in the short term, plans should be laid now to reduce the tax burden in the medium term.

Mr Barron asserted: "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.

"It is also no use shifting the burden around and placing it on other parts of the economy, as with the Budget decision to tax North Sea oil companies more heavily in order to reduce fuel duty. All this will do is crush productive sectors of the economy which the Government should be nurturing. Instead, the tax burden must come down across the private sector as a whole in order to encourage economic growth.

"Above all, everyone needs to understand the true size of the tax burden. If businesses cannot thrive because of a high tax burden, funding for public services will dry up."