The Impact Of Tax On Small Businesses

1146 WordsSep 7, 20175 Pages
Due to the value added tax rise in 2011, the Federation of Small Businesses (2011) estimated that 1.6% of the labour force would be lost. The Centre for Cities (2015) shows that there is 20 percent of small and medium sized enterprises in the United Kingdom, they reduced their workforce between 2011 and 2014. It is the same rate between 2008 to 2011. Although small and medium sized enterprises contraction is less than the 28.8 percent of their expanding, they still lead nearly one million people unemployed between 2011 and 2014. The Federation of Small Businesses (2011) also hopes the Government could cut VAT in the construction and tourism sectors to 5 percent, and it is a good way to help small businesses create jobs and increase…show more content…
The compliance costs have a significant effect on the smallest businesses, but the costs are hardly visible for the largest companies. OECD (2007) find an interesting conclusion. Although tax compliance costs are higher for large enterprises, tax compliance costs are higher for small businesses as a percentage of sales. Kevin Partner (2010) pointed out that when the small business commodity prices, the customer demand for goods fell far more than the amount of customer payments increased the rate of increase. It is more difficult to anticipate the impact of this VAT on increasing or decreasing the number of customers. 2.2 Value added tax schemes From what has been mentioned above, there is a great burden on small businesses, and the complexity of tax rules is one main element. It incurs some cost that small businesses collect VAT from their customers and passes it to HM Revenue and Customs. Adams and Webley (2001) show that most of small businesses have seldom considered accepting the costs as part of running a business. However, some small businesses are reluctant to bear the relevant costs especially construction industry, and they are not willing to do unpaid work for the government. It means that value added tax schemes need to be in operation in order to help the balance of small businesses. Shaw, Slemrod and Whitin (2008) observed that compliance costs would be lower when the tax is simple. It means that the tax rules should be simple or
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