|
The Finance Bill which enacts the measures set out in the Budget, was scaled down and rushed through Parliament in a matter of hours due to the lack of time caused by the announcement of a General Election.
Mark Prisk MP |
During the wide-ranging debate, Mark Prisk, Conservative MP for Hertford and Stortford and a well-known campaigner on small business issues, used the opportunity to make the case for fairer treatment for small businesses.
Dividend tax
He began by criticising the Government's U-turn on the zero tax rate for small businesses, the so-called IR591 or dividend tax.
Referring to Clause 13 of the Bill about the 'non-corporate distribution rate for small companies', Mark Prisk said:I am told by the Bill that it will remain at 19 per cent. That phrase is far from being as innocent as it appears. It masks a history in which a tax was once promoted by the Paymaster General (Dawn Primarolo).
"Sadly, she is not with us today, but she told us that small businesses should consider the change that the Government were making to try to reduce their tax burden to zero per cent. It was a gift horse that small businesses should not look in mouth. I forget the exact words, but the point was the same.
"However, two years later, when the Government discovered that the number of corporates being created was far in excess of what they anticipated and that the poor, old Chancellor was losing money faster than he expected, they needed to change it. Businesses that were previously encouraged to take up the provision - such was the Government's benevolence - were suddenly told that it was wicked and shameful behaviour. It was a form of tax avoidance on which they needed to clamp down. None the less, it was the same policy."
Nasty tax avoiders
He was critical of the changes to legislation which provided a different climate for small businesses.
Mr Prisk told the House of Commons: "This constant attempt to rotate policies - to try something and, if it does not work, to adjust it - seriously damages small businesses. Sadly, and all too often, the Government do not understand the distinction between a "firm" and a "company", but they have encouraged many firms to become incorporated because that is how the firms thought that they were meant to arrange their affairs. They do that to keep their tax bills at a reasonable level, but they are then told that that is wicked and nasty. They are nasty tax avoiders who must be clamped down on.
"Such behaviour by the Government makes most entrepreneurs say, 'Forget it. I'll give up setting up my next business to create the next set of jobs and the next tranche of wealth and I'll go and enjoy my villa in Portugal. I wasn't planning to go there now, but I will do so because I'm fed up with the way that the Government treat things.' That is one aspect of the way in which the Government deal with small businesses."
Complete bunkum
Mr Prisk used the debate to 'have a go' at Alan Milburn for his recent remarks about removing the self-employed from the economy. (See Self employed? You don't count - Shout99)
He told the House: "The last aspect of the Bill to which I wish to refer is an omission as much as anything else. I refer to the way in which the self-employed - not companies - are dealt with. Earlier, I mentioned the Chancellor of the Duchy of Lancaster (Alan Milburn). When trying to explain away the awkward figures on the fall in certain incomes, he said that they were irrelevant because they had been skewed by the self-employed, who were less relevant to the central question.
"The Chancellor of the Duchy of Lancaster said that the incomes of the self-employed were entirely global, and I appreciate that he was self-employed for only a short time when he was able to spend more time with his family. For those of us who were self-employed for 10 or 11 years and who actually understand the principles behind the figures, the idea that the majority of the self-employed are globetrotting entrepreneurs who are on and off jets each and every hour is complete bunkum. That demonstrates both his economic ignorance and, frankly, the Government's unwillingness to understand the smallest of our entrepreneurs - the self-employed."
IR35 - 'does not work'
He concluded by attacking the absent Paymaster General, Dawn Primarolo, and specifically for the role she played in the introduction of IR35. He also claimed that the IR35 take fell well short of predictions and that the Revenue had only been successful in two cases.
Mr Prisk said: "I am disappointed that the Paymaster General is not in the Chamber because the classic example of that attitude is, of course, the infamous IR35. When the measure was introduced, we were told that it would deal with wicked practice and tax avoidance that should not take place. We were told that £400 million would come back to the UK Government that was rightly theirs.
"Here we are, two or three years later in 2005. When we make inquiries of the Inland Revenue to find out how many cases have been brought, we are told that the number is 200 or more. We then inquire how many of the cases have succeeded and how much of that £400 million revenue has actually come pouring through the doors of the Treasury. I am told that roughly two of the 200 cases have been successful, so 198 have failed.
"The frustrating aspect of the situation is that all the other self-employed souls who had to try to change their arrangements to comply with the legislation have suffered cost and a waste of their time only to find that the measure does not work. It has not brought in the revenue that we were told that it would and it has created a bureaucratic nightmare for the law-abiding majority who have tried to comply with it. The situation shows that, as is so often the case with the Government, they are all talk and no action."
--
If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'.
-
Susie Hughes © Shout99.com 2005
|
