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Small Business Taxation and Income Inequality: The View from Canada

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  • Michael Smart

Abstract

The Canadian tax system features exceptionally low rates of corporate taxation for small businesses, together with a system of corporate-personal tax integration. While in principle the system delivers low tax rates on active business income while ensuring equity and neutrality, there are substantial opportunities for tax avoidance by high-income professionals. This paper discusses the role of recent tax and regulatory changes in encouraging incorporation by high-income professionals, as well as the implications for the measurement of income inequality using tax data.

Suggested Citation

  • Michael Smart, 2021. "Small Business Taxation and Income Inequality: The View from Canada," National Tax Journal, University of Chicago Press, vol. 74(2), pages 493-512.
    • Handle: RePEc:ucp:nattax:doi:10.1086/714369
    DOI: 10.1086/714369
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    Cited by:

    1. Pablo Gutierrez Cubillos, 2022. "Dividend tax credits and the elasticity of taxable income: evidence from small businesses," Working Papers 630, ECINEQ, Society for the Study of Economic Inequality.

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