Blame those Eastern Europeans, says Chancellor [BT broadband office]

Blame those Eastern Europeans, says Chancellor

Posted 3 April 2007 at 8:56AM by Simon Dickson in Investment and finance

Don't blame Gordon Brown for the small business tax rise in this year's Budget. Apparently, according to the Chancellor himself, it's all the fault of dodgy operators in Eastern Europe.

Mr Brown appeared before a House of Commons committee last week, and was asked to 'enlighten' them as to why corporation tax had been reduced for larger companies, but increased for smaller companies. In response, he expanded on the point he made during the Budget speech about individuals 'artificially' incorporating as companies.

'Schemes are being marketed right across Eastern Europe, encouraging people to set up companies purely for the purposes of avoiding taxation,' he told the Treasury Select Committee. 'People who are coming to work in this country are being encouraged to form, and work through, managed services companies even before they come into this country. It is of course a problem that every country faces, but it is a problem that we are going to deal with, in a way that does not penalise the good company that is investing in the future.'

The Chancellor repeated his assertion that the vast majority of businesses will be completely unaffected by the proposals: 'only 1.3 million of all our businesses are incorporated as companies,' he said, 'and a large number of them, perhaps over 400,000 of them, pay no tax whatsoever, so again they are unaffected by these proposals.'

And he insisted that companies which were investing in the future would ultimately be better off as a result of the investment allowances on offer. 'All the money that we have had to take from making this change in the small business tax rate purely to deal with tax avoidance is recycled back into the business community as a result of what we have done either for small businesses or for the self-employed,' he claimed.

But his justification wasn't enough to satisfy the Federation of Small Businesses; a spokesman told BBC News that Mr Brown was being 'disingenuous', and asked: 'Why did he not close that particular loophole, rather than increasing tax on small firms, the vast majority of whom don't incorporate as a tax dodge?'

Tags: budget, corporation tax, gordon brown, immigration

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Comments

1. At April 3, 2007 1:25 PM, Steven Salter wrote:

Thanks very, very much Mr Brown, if it is'nt hard enough to run a small business in this day and age, with all the false promises made by a labour goverment and now even the V.A.T man jumped upon their band wagon by introducing yet another tax system within the construction industry. Over the past 5 years all i see at the end of the week is a pile of cheques upon my desk waiting to be signed, much greater than mine for our sub-contractors, i run a reasonably sucessful business and keep wondering when i may see some fruit of my looms.

2. At April 3, 2007 3:11 PM, Brendan wrote:

I am sure that Mr. Brown collects enough tax from ourselves without introducing more taxing for small business..it is time Mr. Brown put his hands back in his pockets and wiped the greed from his eyes..shame on you sir.

3. At April 4, 2007 12:42 AM, Roderick Sims wrote:

This government is in the pockets of the large corporates as they demonstrate time and time again. They have done incredible damage to the UK economy (destroying the technology industries faster than the painful demise of the old heavy industries) which will take years to reverse. A foolish and arrogant man is our Gordon! Sooner they go the better!!

4. At April 5, 2007 10:44 AM, Silver Bull wrote:

This man encouraged small firms to incorporate with zero tax on the first £10,000 in profits with the sole intention of increasing taxes further down the line. Which he is now doing. He is incapable of telling the truth and God help us when he becomes PM!

5. At April 5, 2007 5:52 PM, Colin Reeves wrote:

In this technological age where the Passport Office will be asking new applicants a selection of questions from over 200 things the Government knows about us, but other people might not, is it really beyond the wit of Gordon Brown to determine if a small company pays VAT,Tax etc commensurate with the things a trading company might do? Admit it Gordon, its just another tax to provide more money to welcome those same Eastern Europeans that you so vehmently blame.

6. At April 10, 2007 12:28 AM, George Kirkwood wrote:

Great move, Gordon. I run a small, but successful and profitable, software development company. Perhaps companies like mine are a thorn in the side of larger corporates and Gordon is just giving them help to get rid of us. I pay tax, NI, VAT etc., and have done for 9 years. Surely it's easy to spot a tax avoidance scheme versus an established legitimate company ? If you need any help with this distinction Gordon, just ask.

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