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Monday, July 31, 2006

'Localism' Reform Of Corporation Tax

Fast growing small businesses create most new jobs.(Storey. Warwick Business School)

They are usually under-financed and have cashflow problems, which limit their growth phase. They are usually profitable and pay large amounts of corporation tax.

If this sector could be targeted for 100% corporation tax relief, it would save the government money, as far more jobs would be created, and the capital base of such companies would establish quicker and more would survive any sudden downturns.

The growth phase of most fast growing companies (20% per annum or more) is usually about ten years. If growth is defined as growth in sales combined with growth in employment, once a company hits plus 20% they should pay no corporation tax. At plus 10% they should pay half. At plus 5% three quarters. Another condition, no dividends should be payable.

These incentives would persuade far more small companies to plan for growth, increase the country's productivity, and its capital base.

Most entrepreneurs tire after ten years of 20% plus growth. At least these golden years would not be wasted in payment of tax.

2 comments:

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