As an organisation and as the G8 Summit approaches we are urging the government to make changes to the UK tax system to address growing trends of avoidance and evasion and to simplify an increasingly complex tax regime.
Over the past year the UK has woken up to the scale and nature of the problem. The tax strategies of multinationals are in the headlines and there is growing controversy that a large number of them are paying as little as 1% tax on their profits here on UK soil.
David Cameron has placed tax avoidance at the heart of the G8 with a strong call to action on a global scale. The general public and UK tax payers are expecting a clamp down and the answer to questions our tax regime and the role of our government and HMRC. Many believe that they have turned a blind eye to aggressive tax strategies benefitting the richest and most powerful corporations and individuals.
Earlier in the year we decided to commission a survey with 1,000 small and medium sized businesses and the results revealed that more than half (55%) think the complexity of the tax system has become more costly to SMEs than big business.
Local enterprises are being investigated nationwide through the HMRC taskforces and yet big corporations are exploiting loopholes in our tax system by having deeper pockets to pay for advice. When we look at how much money the taskforces are trying to claim compared to how much tax has been avoided from multinationals not paying their fair share - the gap is huge and laughable.
35% of SME business owners said they think tax policy has to change and a further 33% said there needs to be more transparency so that tax records are more readily available in the public domain. This has been brought to our attention by other organisations and David Cameron has responded. Many will be hoping the G8 and G20 provides a solution that addresses this vast problem, but can collaboration really happen on a global scale? Can public trust be rebuilt after of all the scandals and 'sweetheart deals' that have been splashed across our papers?
David Cameron clearly states that the SME sector is crucial to lifting the UK out of the recession yet 46% of SMEs believe there aren't enough ways for entrepreneurs and startups to access finance and capital. Our tax system has become too complicated and a result, the majority of small businesses are struggling and feel disadvantaged and unsupported.
This has been heightened by the strict and regular timeframes enforced by HMRC (such as Real Time Information) which have added pressure to SMEs and entrepreneurs who are having to cope with a completely new way of recording PAYE. The knock-on effects of this has been identified by IT finance provider Syscap who reported a 60% increase in the number of businesses applying for finance to cover tax bills over the past year.
I will watch the G8 Summit closely next week to see if this topic gets debated and will be hoping that these discussions turn into actions so we can be proactive in putting solutions in place. By simplifying laws and having more transparency we can encourage fair play and restore faith in our tax system. This will take time, but is necessary if we want our economy to grow and if we want our SME sector to prosper and thrive lifting us out of the recession.