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The Entrepreneurial Exchange

Entrepreneurs Will Rise Above Tax Burden And Negativity … But They Shouldn’T Have To

Entrepreneurs will rise above tax burden and negativity … but they shouldn’t have to

COMMENT: John Anderson

ENTREPRENEURS ARE not known for their negativity, but even those of the most upbeat disposition must be struggling to find a positive angle to the chancellor Alistair Darling's latest wheeze - bringing in a 50% tax rate for those earning more than £150,000 a year. Although taxation is reserved to Westminster, the move is supported in principle by the Scottish government.

Like last year's changes to the capital gains tax rules, the Brown government's move seems to be yet another signal that although it claims to be pro-business, it is systematically dismantling all of its entrepreneur-friendly policies.

This is surely a backward step when it comes to pulling out of a recession, as it is then that the spirit of entrepreneurship comes into its own, with risk-takers leading the way back to a healthier economy.

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While the Entrepreneurial Exchange (EE) is in no way a political lobbying group, it is difficult not to be drawn into a political stramash when it seems our members' interests and ambitions are coming under steady attack.

Of course, by no means all EE members will be affected by the measures in the recent Budget - after the ups and downs of the last few months, many business-builders will not reach that tax bracket for a while yet.

Just how well entrepreneurs have fared in general over the economic downturn is tricky to quantify, but at the turn of the year the EE undertook a survey among its 450-plus members which drew some interesting conclusions.

Written by Professor Colin Mason of the Hunter Centre for Entrepreneurship at the University of Strathclyde, the report concluded that the outlook was mixed. He wrote: "A significant minority of respondents appear to be under relatively little pressure as a result of economic conditions. In some cases this is linked to being prudent in the past.

"Another significant group appear to be under some pressure, but are coping. However, there is also a very small proportion of respondents who are clearly in great stress.

"There are also a handful of respondents who have been able to exploit opportunities and so can report - in some cases with a hint of embarrassment - that they are growing in spite of the economic conditions."

This is an important conclusion. Contrary to the prevailing mood, it is by no means all doom and gloom among the Scottish entrepreneurial community.

In his report, Mason stresses the importance of staying positive and this was very much a theme at the EE's recent spring conference at Gleneagles.

There was an impressively positive air among the 230 delegates. The experienced entrepreneur has been through a recession before and has instinctively taken the steps necessary to get their businesses in the best possible shape to ride out the tough times. As ever, the core objectives of the EE - of sharing experiences between members - was to the fore, with less experienced members picking up practical tips focusing on cash generation, cost control and, above all, staying very close to customers.

One of the biggest obstacles, however, seems to be the relentless flow of negative media comment, with this study and that study (often produced by vested interests such as insolvency practitioners) predicting a record number of business failures and the ever-increasing length of time before the economy turns. We have seen examples of perfectly well run young businesses almost paralysed with fear that the end is coming.

You would be hard pressed to find any of our members who are not investing their time and expertise in socially useful ventures, and keeping a close eye on the outcomes from that investment. The proven success of such ventures - often turning around decades of failure - leads me to believe that by leaving more in the bank accounts of the wealth creators you can be absolutely sure that they can do more with it than if you just pour it into the black hole of government finances. Jim McColl's chairmanship of Glasgow Works, which has made unprecedented inroads into welfare dependency is a case in point. The main beneficiaries of the tax rise will be the army of tax advisers who will be employed to prove that taxable income is £149,999.

The Budget announcement about the 50% tax rate and the changes to capital gains tax last year might lead you to believe that this is not a country that believes in entrepreneurial spirit and reward for hard work and calculated risk taking.

We take the contrary view. We have plenty of entrepreneurial role models who are more than willing to share their experiences; a new generation of young people in Scotland who are coming out of our schools, colleges and universities with a better understanding of the opportunities for the ambitious business builder; emerging technology companies coming from our research institutions; an increasing availability of risk capital from the business angel community; and an economic development framework that is fit for purpose.

Collectively we are in a good position to emerge as a stronger economy - if we believe it and stay positive. Entrepreneurship, above all, is a state of mind.

John Anderson is chief executive of the Entrepreneurial Exchange

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