A BUSINESS forum is urging the government to reform the tax system in a bid to help small businesses in Dorset tackle the credit crunch.

Research undertaken by the accountancy information provider CCH indicates that tax professionals believe the government should focus on small and medium-sized enterprises (SMEs), rather than large multi-nationals. But the reverse seems to be happening.

When accountants and tax specialists were asked which of 24 taxes should be cut to improve the long-term performance of the economy, 53 per cent chose corporation tax paid by small businesses, compared to 11 per cent who thought that corporation tax should be reduced for larger companies.

This has convinced the Forum of Private Business (FPB) that the government needs to reform the tax system to support small businesses across the UK.

Failure to do so could have severe implications for the economy over the next twelve months.

The FPB's tax adviser, Pat Cobham said: "Considering this government stated in its manifesto that it is trying to encourage entrepreneurs, it is now sending out completely the opposite message. The increase in corporation tax to 22 per cent by 2009 will have a significant short term and long term impact on the economy as it is a disincentive to entrepreneurs."

The research from CCH did suggest alternative solutions. Increases in cigarette and alcohol duty were considered as the least likely to damage to the UK's economy, with an increase in the controversial tax on non-domiciled UK residents being the third most popular.