Osborne urged to lighten the load on business in his Budget
As Osborne’s next Budget dawns on March 20, the battle lines are being drawn up.
A major warning shot was fired by London Deputy Mayor Kit Malthouse, who told businesses last Monday at a Budget debate hosted by the Federation of Small Businesses that Chancellor George Osborne needs to go faster on cutting the vast forest of taxes on business down to size.
Malthouse complained that the process of tax simplification, for which Osborne set up a dedicated office, has been “one of the missed opportunities over the last couple of years”. If you didn’t get where Malthouse was coming from, he blasted the tax system as “ridiculous”.
“From a company point of view and a personal point of view, there is this thicket that we’re all struggling with that is choking us like weeds around our necks. There was a chance to simplify it but sadly that seems to have been lost,” he added.
Malthouse’s tub-thumping tax attack has drawn widespread support from businesses across London.
FSB London Policy Chairman Sue Terpilsowski told LondonlovesBusiness.com that the level of taxes on business were holding them back from growing.
“Four in ten businesses said employment taxes were the biggest barrier to success, and 37% said corporation tax and VAT was as great an obstacle. It is clear that small businesses are weighed down by the sheer volume of regulatory and tax burden. The Deputy Mayor is quite right to say that taxes need to be simplified.
“Furthermore, research by the FSB for the Office of Tax Simplification found that on average 50 per cent of small firms spend between two and eight hours understanding, calculating and completing tax returns so any system that will make it easier for micro and small businesses to pay tax will be welcomed.”
Paul Deeming, who is CFO of the Hakkasan Restaurant Network, is scathing about the “peverse pleasure” that government has in hitting business with more taxes.
“The plethora of taxes that companies have to monitor and pay is extensive and the personnel time and system administration to ensure compliance is a sever burden on businesses, especially the smaller business with limited expertise. The government should be aiming to aid those businesses and not stifle them with administrative and taxation burdens.
“Rather than simplify the taxes the government appears to take a perverse pleasure in finding ways to increase costs to business, e.g. pension scheme auto enrolment and company minimum contributions.”
Deeming isn’t too optimistic that Malthouse’s call for simpler taxes will be heeded, adding: “If Kit Malthouse believes that there is the appetite for those with a vested interest to allow the highly complex and lucrative taxation system to change, he is sadly misguided.”
Stephen Herring, senior tax partner at BDO LLP, criticises the government for its laxness on simplifying taxes.
“Tax simplification for businesses is the area where this Government has made the least progress in terms of tax reform. Businesses understand and mainly agree with the priority given to the reduction of the structural fiscal deficit but are disappointed with the slow progress towards tax simplification despite the establishment of the Office of Tax Simplification. The upcoming Budget is the perfect opportunity for the Chancellor to renew and refresh the tax reform and simplification agenda by introducing authentic tax reforms to simplify processes and ease the compliance burden on businesses.
Guy Mucklow, CEO of IT firm PostCode Anywhere, throws his weight behind Malthouse’s call for tax simplication.
“I would agree that business tax needs simplifying as it takes a considerable amount of effort and cost to process – all of which land in the business owner’s lap. Some industries are worse than others. I know that the subcontractors tax in construction was a real pain.
“The biggest issue with corporate tax in particular is that it was designed for the pre-internet era and allows larger businesses to move their tax jurisdiction to where ever they want. Apple, for example, has over $60bn in untaxed profits banked in the BVIs & Google regularly pays just two times our CTax on 1,000 times our UK sales. Unfair!”
Meanwhile, Dominic Monkhouse, who is MD EMEA for PEER 1 Hosting, is furious about the level of taxes he has to deal with.
“Stop taxing the hell out of small businesses! Let them generate an income and invest in growing their business. Large companies like Google and Starbucks are getting away with murder and small companies are being hit with big taxes – it’s not right,” he fumes.
Jason Piper, technical manager for tax and business law at the ACCA, tells LondonlovesBusiness.com that business taxes are “can be far too complicated”.
“The simplification of tax for all businesses, and indeed all taxpayers is essential. Small businesses are an excellent place to start on tax simplification; they are by definition engaged in the pursuit of profit, but it is now well established that the burden of tax administration and compliance costs bears down disproportionately upon them. The way things stand at the moment, the small business owner is expected to understand the same UK tax legislation and the 10,000 pages of the secondary legislation that goes with it, as the large corporations. It is far from user friendly” he adds.
Emily Coltman, is Chief Accountant to FreeAgent, who provides an online accounting system for small businesses and freelancers.
“I wholeheartedly agree with Kit Malthouse that the tax system for small business is vastly over-complex and that the Government’s proposed simplification does not go far enough.
“Many would-be small business owners are put off by the complexity of the UK’s tax regime and many who do start a business are confused and utterly bewildered by the maze of taxes and tax rules that they have to navigate. By radically reforming and simplifying our small business tax regime we could create a platform for small businesses to thrive and grow.”
Last but not least, Pimlico Plumbers boss and LondonlovesBusiness.com columnist Charlie Mullins said:
“Anything that simplifies the tax system and makes it fairer, especially for SME’s is welcomed by me. The tax system in the UK is incredibly complicated and the administration costs associated with implementation can be devastating to small businesses. Even for larger companies these costs eat into hard earned and much needed profit. The cost of tax collection also costs the government extortionate amounts of tax
payer’s money that could be better spent elsewhere.
“A simplified and more efficient tax system would go to further prove that the Coalition recognises the role entrepreneurs have to play in securing economic recovery for the UK by giving businesses the opportunity to grow. And if a less complex system is easier for the government to enforce and make it easier to stop corporate tax avoiders that can only be a good thing.”
Rarely for such a diverse group, business is resoundingly behind Malthouse on this call for the Chancellor to get his axe swinging to slash taxes.
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