Budget 2012: Do small firms want a cut in 50p rate?
Ahead of George Osborne’s budget statement, Business Correspondent Sarah Smith takes a look at what the hotly-debated cut in the 50p tax rate will actually mean for small businesses.
“The 50p rate says Britain is not open for business and will stop entrepreneurs coming here in the first place.” So claim supporters of cutting the highest rate of tax.
They think it sends a message that there is an anti-business culture in this country. They claim that it is a disincentive to innovation and success. As though business owners and their employees simply stop working at the point at which their efforts would start to reward them with a salary of over £150,000.
Most struggling small businesses in Britain can only dream of the day when they might by able to pay their staff or themselves over £150,000. They don’t think that cutting the highest rate of tax will help them at all. It won’t decrease the amount money they, or their employees, pay to the Treasury.
And it won’t necessarily free up a lot of money for customers to spend on their products. Anything that increased consumer confidence would give business a big lift. But when you cut income taxes for the highest paid workers they tend save the money or spend it abroad, giving a bigger boost to small businesses in Tuscany than those in Telford.
More from Channel 4 News: Osborne set to scrap 50p tax rate
Handing back more money to lower paid employees, to those paying the basic rate of tax, would be a much surer way of making sure the extra cash was spent on UK high streets. As would cutting VAT. But that’s not on the agenda.
There will be a cut in corporation tax. It has already been announced in previous budgets that corporation tax will gradually be reduced from its current 25 per cent to 23 per cent by 2015.
Chancellor George Osborne may also announce he wants to see corporation tax eventually reduced to 20 per cent. But that won’t help businesses that are suffering now. Corporation tax is a tax on corporate profits. If you aren’t making any profits then a cut in corporation tax isn’t going to help you much.
Big business will welcome both these tax cuts. But smaller firms feel the whole package is skewed toward the big financial services industries which employ plenty of people who do earn over £150,000, whose employees probably could chose to move abroad if they really felt aggrieved about their income tax rates (although there is scant evidence that ever actually happens) and who make millions in corporate profits.
Some of them are same financial institutions who smaller businesses complain won’t give them a loan… but that’s a different story.
