Small businesses are expected to bear the brunt of any tax rises in this week's Budget according to Wiltshire-based accountants and business advisers Solomon Hare.

Taxes under Labour have risen from 34.6 per cent to 38.2 per cent of gross domestic product, which equates to a £40 billion rise in the annual tax burden, but still Gordon Brown is faced with lower tax revenues than he expected, increased public spending and a black hole bridged, so far, by borrowing.

According to Dave Mouncey, Partner at Solomon Hare, businesses are firmly in Mr Brown's sights. We're likely to see small owner-managed companies coming under attack," he said.

"The Chancellor needs to redress measures introduced in previous years, which made it more favourable, in tax terms, for sole traders and partnerships to become companies.

"This has seen the number of companies in the UK leap from some 60,000 to over 200,000 over the last few years, contributing to a lower level of tax receipts than anticipated.

Mr Mouncey continued: "It seems likely that on Wednesday Brown will announce measures to restrict the ability of companies to exploit differences in the tax treatment between earned income and dividend income.

"It could potentially increase tax costs on small businesses by 19 per cent, and is likely to involve a National Insurance charge on dividends from companies with few shareholders - a move we're referring to as the Small Business Levy."

On the economy, the Budget will probably give the clearest guide as to whether 'tax and spend' is the basis on which the Government is directing the country's economic policy.

"The key issue, as always, will be whether the Chancellor's review of public finances and the course that he steers will maintain a stable economic environment that will enable business to prosper," continued Mr Mouncey.

"Not so long ago, Britain was considered to be a low tax country, but with tax rises over recent years and with precious little to show for them in terms of improvements in public service, there is a view that his policies are steadily blunting the country's competitive edge, with the increasing relentless burden of taxes and red tape."

One measure that businesses will view as red tape is the possible introduction of transfer pricing rules between UK companies, albeit with an exemption for small and medium sized companies.

It is clear from some of the measures that Brown has announced in previous years that he does have a genuine interest in learning from America about enterprise - but will tax and spend be a fatal flaw to Britain maintaining a competitive economy?

Only time will tell