20 November 2006

Compliance costs discriminate against small business

A revealing graph from the current Economist:

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I don't know about the 'tax burden' element, represented by the height of the bars. I can't imagine that Italian companies pay nearly 80 per cent of their actual profits to the government. Eighty per cent of declared profits maybe. But the figures in the rectangles, which is the number of hours per annum that businesses have to spend preparing and filing tax payments are interesting. They give some idea of how complex tax (and regulatory) regimes tend to favour large businesses over small. They range from about 80 minutes per week for businesses in New Zealand and Switzerland, to more than 11 hours per week in Spain. Time costs of compliance with other regulations, such as health and safety concerns, employment documentation etc, are likely to be equally high. Such costs obviously fall disproportionately heavily on smaller businesses. In fact most government interventions, however well meaning and high sounding in principle, tend to favour the large and global at the expense of the small and global.

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