New research from UK accountancy firm MacIntyre Hudson has revealed “severe dissatisfaction” amongst businesses with the UK’s tax regime.
The findings, released on September 1, would seem to underline a widespread concern that the government's need to increase its tax take in order to meet its escalating borrowing requirements will kill any green shoots of economic recovery before they have a chance to take root.
The survey of 350 small and medium-sized businesses revealed that 72% believe that the UK regime has become less competitive than other major economies in recent years.
More than 8 in 10 (82%) believe tax rises now pose a greater threat to economic recovery than cuts in public spending, and almost all of the respondents (97%) believe that the escalation of government debt will inevitably lead to further tax rises for many years to come.
Just over three-quarters (76%) of respondents argue that the tax increases for high earners already announced by the Chancellor – including the withdrawal of personal allowances for those earning over GBP100,000, the new 50p top rate of income tax, and restriction in pension relief for those earning GBP150,000 – will reduce the incentive for entrepreneurs to work hard “beyond a certain point”. Over a third (39%) claim that they personally will put less effort into 'going the extra mile' in their own business.
Nearly 9 in 10 (89%) of those questioned expressed the fear that Britain will fall victim to a ‘brain drain’, as top talent leaves Britain’s shores for more favourable opportunities elsewhere. More than one in 10 (12%) revealed that there is a “significant chance” that their own business will move abroad to a more favourable tax climate, while 72% would consider such a move if it were practicable.
Of those involved in personally establishing a business in the UK, 20% say it is unlikely they would have chosen to do so under the current tax regime, and the majority of respondents (69%) described the current system as less competitive than when they first set up their own business.
Nigel May, Tax Principal at MacIntyre Hudson, commented on the poll results that: “The message from business is clear. What was once a celebrated, competitive tax and regulatory regime has become increasingly burdensome, particularly for those ambitious individuals who underpin the health of our economy.”
He added: “The government’s optimistic forecasts for recovery are based on the assumption that Britain’s entrepreneurs will continue to innovate, build, work and take risk as they have before. What the Chancellor may have overlooked is that these essential activities for future growth rely on the very people his so-called ‘targeted’ tax rises hit hardest.”
While the survey reveals cautious optimism about the current economic outlook, the research also finds that in the event of future tax increases, 69% of businesses would be forced to make substantial cost reductions.
For nearly half (43%), this would involve fresh redundancies, while over two thirds (71%) would hold down pay within their business because of tax rises. Over half would either delay plans for expansion (56%) or cut back on investment (50%).
Patrick King, Tax Principal at MacIntyre Hudson, observed that: “Unlike the government’s apparent belief in a rapid economic recovery, our research shows that businesses are far more cautious. The inevitable consequence of tax rises on business would be further redundancies, reduced pay, and cuts to business investment.”
King concluded: “If the government wants businesses to soak up excess labour and help feed money back into the economy, it needs to play a much more careful hand. Yet no amount of bluffing can disguise the legacy of a public deficit that would make most nations wince. Sadly, the only likely ‘Royal Flush’ for this government is likely to come at the ballot box.”
