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Trade and industry secretary Alistair Darling has said the rise in corporation tax for small businesses announced in the Budget was a necessary measure.
Mr Darling told BBC Radio 4s Today programme that the increase in the levy up from 19 per cent to 22 per cent by 2009 would help ensure funds were being directed to the firms that needed it.
At present, he claimed there were too many instances of other individuals and organisations using tax planning strategies designed to benefit small businesses.
"We had to do that because there was increasing evidence that a number of firms, or a number of individuals, were incorporating not because it was the best thing to do but because it was being driven by tax advantages," he explained.
"What we did in the Budget was a balanced approach. We cut the main corporation tax rate, and in addition to that of course weve increased allowances, which small businesses will benefit from."
He also argued that a drop in income tax would also benefit many smaller businesses, adding that Britain was "a good place to do business and an easy place to start up business".
The Federation of Small Businesses (FSB) was among those organisations unhappy with the Budget and its plans for business start-ups, criticising the chancellor for "giving with one hand and taking with the other".
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