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Tax on SMEs will prolong recession

Oct 30 2009

The Chancellor is being urged not to increase taxes on small businesses in his pre-budget report.

Increasing taxation on the country’s small businesses would plunge the economy further into debt and cause spiralling unemployment, according to a report by the Centre for Economics and Business Research (CEBR).

The CEBR report found that if the government raised the rate of corporation tax from 21 per cent to 26 per cent it would cause 100,000 jobs to be lost from the small business sector and reduce economic output by £4.3 billion.

Ben Read, managing economist at the CEBR, says: ‘Our report shows that the potential benefits to the public purse from increasing taxes on small business are at best minimal, and in the long term may actually damage public finances. Moreover, almost all empirical evidence shows that increasing business taxation provides disincentives for small businesses to engage in activities that they have particular strengths in: entrepreneurial activity, investment and innovation, and employment.’

According the Federation of Small Business, 120 businesses are currently closing each day.

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