The Institute of Directors (IoD) has slammed the coalition for failing to cut the tax burden for small companies in its first year.
According to the IoD’s annual report, the tax burdens on small and medium-sized businesses are far higher than the corporation tax rates of 20 and 26% suggest – in fact, such firms pay tax at rates between 32 and 43%.
The institute says this is unlikely to change, even when corporation tax rates come down in 2014, because of additional taxes including employers’ national insurance, business rates and road fuel duty.
The IoD is urging the government not to lump any further tax burdens on businesses, warning that a tax burden that “grows in percentage terms along with the business, potentially to quite horrific levels, is a major obstacle to growth.”
Richard Baron, IoD head of taxation, said: “The private sector is going to have to drive the recovery. But tax burdens remain a real drag on growth. There is limited scope for radical cuts in the short term, but we should lay plans now to reduce this heavy burden sharply in the medium term.
“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.”