The Chancellor is seeking to make owner-managers pay the right amount of tax on dividends payments taken in lieu of salary - and close the tax loop-hole.

Brown also looked likely to put forward the case for annually reviewing the economic impact of the UK joining the Euro.

It seemed a long shot that there would be major tax increases, but there is some speculation on possible alterations to VAT or national insurance rates.

BPIF director of external affairs Cicely Brown said: The tightening of taxation on small company dividends could turn the tide of company incorporations, which had proved a tax efficient way of distributing profits for small companies.

It could also diminish the surplus retained in business for reinvestment.

The BPIF remained concerned on how borrowing will be kept down, and was also looking for further proof of the governments commitment to improve access to growth capital for smaller businesses.

The transfer pricing issue, which will see large companies have to prove market pricing for inter-company price transfers, could add considerably to administrative red tape.

The announcement of the Euro review has been met with some scepticism from corners of the industry.

* Litho Supplies joint managing director Gerry Mulvaney said he used to be a strong advocate for entry to the Euro, but this had altered over the past two years.

We are in a fortunate position in that the UK benefits from the flexibility of low interest rates, which is a help to businesses, he said.

Mulvaney said if he had any wishes it would be for a reduction in Government red tape, which was becoming greater.

Improvements in investment conditions would also be welcome, he said.


* Pensord Press chief executive Tony Jones called for a steadying ship.

What we need is stability at the moment, and we dont want anything to upset what looks like one of the slowest of improvements, said.

We need to be careful, and a steady, balanced budget is what is called for, he said.

* The Confederation of Paper Industries director of external affairs Kathy Bradley said she had only two wishes for the budget.

One take taxes off of industry, and two put landfill tax up quicker than is proposed.

Bradley said the current rise of 1 per annum still made it far too cheap an alternative.

What will be in the Budget?

* Admission to Euro to be reviewed annually

* Economy forecast to grow by 3%-3.5% in 2004

* Clampdown on tax loopholes for small businesses

* Budget deficit of 31bn in 2004-5.

by Andy Scott