Fears Over Growing Tax Burden Fails To Dent UK Business Optimism

by Jason Gorringe, Tax-News.com, London

14 April 2004

Whilst a recent survey found a marked upswing in UK business confidence in the last quarter, the overwhelming majority of executives believe that the tax burden is "too heavy", and is likely to get worse.

The research conducted by Economist Intelligence Unit, on behalf of accounting firm KPMG, surveyed 147 senior executives in middle market companies with turnovers of up to £500m per year.

It found that almost two-thirds hold an optimistic outlook for the economy, and 70% of firms believe business prospects will range from good to very good. However, the same bosses also expressed “real concerns” over taxation and increasing red tape.

According to the findings of the research, four-fifths of executives believed that the tax burden is ‘heavy and getting worse’, and 76% believe that the tax system is unduly weighted against middle market companies.

In addition, only 4 percent of respondents believed that the Government is listening and acting to make the tax burden on middle market companies lower.

Concern was also expressed over the effectiveness of the government's R&D tax credits. Only one-fifth of those polled reported that the credits had caused them to invest more in research and development activities, and a large proportion, around 20%, complained that the tax credit system was too complex.

Meanwhile, over a quarter of respondents were unaware that the R&D credit existed.

“This a clear case of good news and bad news,” commented Mel Egglenton, Head of Middle Market at KPMG, adding:

“The good news is that confidence amongst business leaders really is taking hold and prospects are much improved. The bad news is that such a high proportion of the sector clearly feels that they are not being helped by what they see as a climate of heavy taxation and administrative red tape.”

"Government must take this seriously and work with the sector wherever possible to address these very real concerns. If they do, UK plc can more fully take advantage of the better conditions that are now emerging,” Egglenton concluded.

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