Tax freedom day - and start-ups suffer from ageism

Crippled by taxes and shunned by the big boys - it's a hard life for budding young firms.

by
Last Updated: 07 Feb 2011

SME owners: put your best frock on and crack open the party poppers, for today is the first day of the year when some of you will actually start earning money for yourself. According to the Institute of Directors, June 10 was ‘tax freedom day’ for a typical employer with 100 staff – i.e. the point at which it has made enough profit to fund its annual tax bill. That’s a ‘remarkably high burden’, says the IoD, which is calling on the Government to make ‘significant reductions’ to business taxes. But with the emergency Budget due this month, the tax burden is as likely to go up as it is to go down...

Smaller companies are slightly better off; those with 5 staff effectively stopped paying their taxes on May 1, while those with 20 staff were all paid up by May 21. But businesses with 100 staff are actually even worse than the average UK resident, who - according to the Adam Smith Institute, which works this out every year - stopped paying for Government spending on May 30.

In fact, even this arguably doesn't tell the full story: the Institute's pointy-heads have worked out that if we include all Government borrowing, instead of just our existing tax burden (on the grounds that all borrowing is effectively deferred taxation, because the Government will have to raise the money to pay it off eventually), our personal Tax Freedom Day wouldn't actually fall until July 8. So we'd be working for more than half a year before we actually earned a penny for ourselves. And if George Osborne crystallises this by introducing a few tax hikes on June 22, we could find ourselves a step closer to this. Maybe scrap those party-poppers after all.

And if a hefty tax burden wasn't enough for start-ups to worry about, a new report also suggests that almost 10% of big companies are now refusing to deal with companies that are less than year old, because they're worried about them being fly-by-night merchants. Now, admittedly this is according Creditsafe, a (you guessed it) credit information provider. But it’s not surprising that when times are tough, bigger companies are choosing to err on the side of caution.

The trouble is, this is going to do start-ups’ survival chances no good at all. And it might not serve the bigger companies well either – by imposing a blanket ban on dealing with new companies, they could miss the chance to get in on the ground floor with the next big thing. Where’s the profit in that?

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Tax freedom day - and start-ups suffer from ageism

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