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New tax measures could harm business

Increases in business and personal tax pose a risk to the health of the UK economy, a survey has suggested.

The survey, carried out by the Institute of Directors (IoD) of a thousand of its members, revealed widespread unease at the possible effects of tax proposals set out by the government in the Budget.

The poll asked respondents to rate each one of ten measures, and the Budget package as a whole, on a scale ranging from very positive to very negative as judged by their likely impact on the economy.

Over two-thirds (69 per cent) said they believed that overall the tax measures set out in the Budget were negative or very negative.

The greatest concern centred on the planned 0.5 per cent increase in National Insurance contributions, with 84 per cent rating the policy as negative or very negative.

Personal tax also came in for criticism. The proposed 50 per cent income tax rate for those earning £150,000 or more, the withdrawal of the benefit of personal allowances at incomes of above £100,000 and the restriction of relief for pension contributions all attracted a negative response from three-quarters of those in the poll.

The IoD said the condemnation came despite the fact that the majority of its members run SMEs and do not have six-figure incomes.

Such measures, the IoD contended, send the wrong signals about wealth creation and raise the spectre of high taxes for larger swathes of the population in the future.

Some tax policies, however, did win the backing of business owners.

The extension of the right to carry back to up to £50,000 of trading losses for three years received the support of 77 per cent. And the 40 per cent first year allowances were seen as largely positive by 87 per cent.

Richard Baron, head of taxation at the IoD, said: “The government faces a very difficult fiscal situation, and tax increases may look tempting.

“But in the real world, people who run businesses of all shapes and sizes believe that tax increases will damage the economy. IoD members, the majority of whom are bosses of SMEs, are deeply worried about the increase in NI. New tax burdens can mean redundancies or businesses going under.”

Mr Baron urged the government to re-think its tax-raising plans and to make amendments to the Finance Bill in order to boost business confidence.