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Small Business Taxation

Author

Listed:
  • Judith Freedman

    (University of Oxford)

  • Claire Crawford

    (Institute for Fiscal Studies)

Abstract

This chapter considers the taxation of small, owner-managed businesses. It focuses on the difficulties created by treating employees, unincorporated and incorporated businesses differently for tax and social security purposes. The authors reject blanket tax incentives for small firms and differentiation between legal forms and concentrate on issues arising from opportunities created on incorporation for the conversion of income from labour into income from capital (taxed at a lower rate). Experience in the UK and elsewhere suggests that an approach that relies on defining a sub-category of small businesses will not produce a satisfactory solution. The chapter therefore examines methods of aligning the effective tax treatment of different legal forms: in particular it considers the advantages of combining a Rate of Return Allowance with an Allowance for Corporate Equity, so as to tax income above the normal return to capital at the same rate whether it is described as dividend, capital gain or salary.

Suggested Citation

  • Judith Freedman & Claire Crawford, 2008. "Small Business Taxation," Working Papers 0806, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:0806
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    File URL: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_08/WP0806.pdf
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    Citations

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    Cited by:

    1. Keuschnigg, Christian & Ribi, Evelyn, 2009. "Profit Taxation and Finance Constraints," CEPR Discussion Papers 7433, C.E.P.R. Discussion Papers.
    2. George S. Oreku, 2021. "Application of digital technology in enhancing tax revenue collection: the case of micro businesses in Tanzania," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(2), pages 173-192.
    3. Raphaela Andres & Timothy DeStefano & Thomas Niebel & Steffen Viete, 2020. "Capital incentive policies in the age of cloud computing: An empirical case study," OECD Science, Technology and Industry Working Papers 2020/07, OECD Publishing.

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