The problem is not the actual burden of taxation on companies, nor even the windfall tax, but rather the requirement that companies implement some key measures of government policy. These include the national minimum wage, the working time directive and the working families tax credit. These are an administrative headache for big employers, and a bit of a nightmare for small companies. While the Government has made much of its plans to encourage small businesses, with the Pre-Budget Report and the Competitiveness White Paper emphasising entrepreneurship, Gordon Brown will have to deliver the goods next month just to offset the adverse impact of these other measures. They fall most heavily on the tiniest firms.
Recent research at Bath University has shown that simply collecting national insurance and income tax contributions through PAYE costs businesses employing 1-4 people pounds 279 a year, whereas the cashflow each quarter means big companies benefit to the tune of pounds 11 an employee. The WFTC could actually end up requiring small employers to pay cash up-front to low-paid staff before they can reclaim it from the Inland Revenue.
Given that the Government buried the reports of two taskforces on small business - one on finance for high-tech companies and one on smaller quoted companies - by publishing their papers on the same day as the Pre-Budget Report, it is easy to see why the business organisations have become sceptical about how much genuine help the Government really has in store for the Budget.
They may be pleasantly surprised, for the Chancellor is sincere in his desire to stimulate enterprise and wealth-creation for the long-term benefit of the economy. Even so, a bit of tension in business-Government relations is a healthy sign of normality. It will keep both sides on their toes.Reuse content