Coalition has not improved the overall tax burden on business in first year, says IoD report

Dated: 7 June 2011

The IoD today publishes the second edition of its annual report, Tax – the weighty burden. This shows that the tax burdens on business are far greater than the corporation tax rates of 20 and 26 per cent suggest. Small and Medium sized enterprises (SMEs) suffer true tax rates of between 32 and 43 per cent.

Key points:

  • The burdens have not got significantly lighter in the first year of the new Government. They will still be very heavy even after the planned cuts in corporation tax rates down to 2014 have taken effect, and those cuts will do little or nothing to help smaller businesses.
  • One reason for this dire position is that corporation tax is only half of the story. There is a whole host of additional burdens, including employers’ national insurance, business rates and road fuel duty.
  • The consequence of the tax burden is that profits made in the first four or five months of the year are drained away by the state, instead of being available to re-invest in the business.

Richard Baron, Head of Taxation at the IoD, commented:

“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.

“It is also no use shifting the burden around and placing it on other parts of the economy, as with the Budget decision to tax North Sea oil companies more heavily in order to reduce fuel duty. All this will do is crush productive sectors of the economy which the Government should be nurturing. Instead, the tax burden must come down across the private sector as a whole in order to encourage economic growth.

“Above all, everyone needs to understand the true size of the tax burden. Campaign groups like UK Uncut would be more likely to achieve their objectives if they spent more time understanding the consequences of high taxes, and less time complaining about companies that legitimately seek to minimise their tax liabilities. If businesses cannot thrive because of a high tax burden, funding for public services will dry up.”


Contact Points

Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243

Notes to editors

  • The Institute of Directors (IoD) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with approximately 38,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
  • The IoD provides an effective voice to represent the interests of its members to key opinion-formers at the highest levels. These include Government ministers and their shadows, parliamentary committee members, senior civil servants and think-tanks. IoD policies and views are actively promoted to the national, regional and trade media. Follow us on Twitter to get the IoD’s reaction on business and public policy issues.
  • The IoD offers a wide range of business services which include business centre facilities, with ten UK centres (three in London, one each in Reading, Birmingham, Cardiff, Manchester, Nottingham, Norwich, Edinburgh, Glasgow and Belfast) and one in Paris, conferences, networking events, virtual offices, issues-led guides and literature, as well as free access to business information and advisory services. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board and director-level training and individual career mentoring programmes.
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