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Chancellor Gordon Brown (and rumored Prime Minister in waiting) gave his Budget speech this week, laying out how Government money will be used and collected for the next few years.
Aside from the headline grabbing abolition of the 10 pence tax rise, Brown's budget was also pretty rough on UK business; small business, that is.
Whilst Chancellor Brown talked at length about the reduction in corporation tax for UK businesses he failed to devote quite so much time to the portion of his budget which stated how this lessening of corporation tax from 30% to 28% will only affect businesses with a turnover in excess of £300,000 per year (i.e. big business) and that businesses with a turnover less than this figure (small businesses) will actually see their corporation tax rise over the coming years from the current rate of 19% to 22% by 2009.
Nick Goulding, chief executive of The Forum of Private Business, summed up the thoughts of many small businesses across the UK by stating: "The Chancellor has used smoke and mirrors to disguise the fact that there is nothing in this Budget to support small businesses. The reduction in the main rate of corporation tax will benefit larger firms, not the smaller businesses that make up the majority of the private sector. The changes made for smaller firms will serve only to further burden them".
Big UK Businesses welcomed the reduction in their corporation tax but stated that this was only the first step in the long process needed to persuade big corporations to stay on British shores and not relocate their businesses to other countries in the EU which offer substantially lower corporation tax rates such as Ireland, Sweden and central Europe.
Richard Lambert, director general of the Confederation of British Industry, said that the tax cuts "acknowledged the need for the UK to compete with the tax regimes in other developed countries in order to secure jobs and investment for the future" and went on to say "The challenge for government now is to get a grip on public spending so as to create the headroom that will be needed for further tax cuts in the years ahead".
Other critics of the Chancellor's budget included the head of taxation at KPMG, Russell Hills, "At first sight, today's Budget looks like great news for business in the form of a 2 per cent rate cut. But, looking into the detail, it is clear that there are distinct winners and losers. The amount that is being given away by the rate cut is being clawed back by reductions in capital allowances."
All in all, a mixed-bag budget. Gordon Brown is expected to try and lighten the mood of small businesses next week by boasting that the UK's economy is growing by 2.9% (higher than predicted) and that the UK business sector is now growing faster than it's rivals in Europe and the United States.
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