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European Commission trying to give SMBs a break

by Hugh Bicheno on 29 June 2008, 10:24

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On Thursday, the European Commission launched a draft Small Business Act, described by EC President José Manuel Barroso as “a step towards a Europe of entrepreneurs with less red tape and more red carpet for smaller firms,” defined as those with less than 250 employees.

The Act is part of a Growth & Jobs Strategy designed to make starting and running a business easier and more attractive. Measures include limiting the time required to start a new company to no more than a week, and obtaining licenses and permits in no more than a month.

SMBs account for 99 percent of companies and 70 percent of employment in the EU, in return for which they are routinely burdened with regulations that have the effect of favouring large companies, find it difficult to obtain research funding and are seldom considered for public sector contracts.

SMBs account for 99 percent of companies and 70 percent of employment in the EU

The act proposes the creation of a new European Private Company legal status to permit firms to trade across Europe without having to incorporate locally, an increase in the VAT exemption threshold to €100,000 (£79,000 – the current UK threshold is £67,000) and an exemption for SMBs that have difficulty reclaiming VAT from consumers.

The Act also seeks agreement to exempt SMBs from new directives wherever appropriate, urging member states to adopt a “Think Small First” approach to new regulations, and to improve government procurement from SMBs – although the US model of a quota system was rejected.

The European association of chambers of commerce (Eurochambres) welcomed the proposals, but pointedly suggested the EC might start by simplifying its own procurement procedures.