Small business taxation Essay Example | Topics and Well Written Essays - 2750 words

Small business taxation - Essay ExampleSimilarly, some activities of the incorporated may be economically similar to those of the unincorporated miniscule businesses. These activities may be similar in economic term but they be different licitly and in terms of rights and obligations.Crawford and Freedman suggest that these different types of entities could be treated in the same way for tax purposes, but it may not be achievable to do so in a straight forward manner because differences in legal forms between such(prenominal) entities have significant interoperable implications on taxation. Some of the treatments of taxation of employees and self-employed people may be based on returns and tax rates. Providing the same tax treatment in relation to receipts may not be possible because receipts vary in nature (Crawford & Freedman, 2008). Business receipts cannot be equated to employees receipts. Business receipts need to be treated under rules that may derive profit figure. Furth ermore, receipts of companies still require to be deducted for the payment of salaries or shareholders dividends. In terms of similar tax rate across the small business spectrum, aligning tax rates to on different levels of income across the incorporated and unincorporated small businesses requires the analysis of tax charged at both corporate and personal level. This is structurally difficult.The second reason why it is not possible to treat the devil types of entities similarly in terms of tax rates and receipts for taxation purposes is because there is a trend in which labour is taxed differently from capital. Higher taxes are often levied on labour than on capital. This causes differentials in tax treatment for different small businesses. Due to this differential in tax rates, there is an inducing of reduced taxes for converting labour income into capital income if possible (Crawford & Freedman, 2008). Incorporation of a small or big business leads to higher scope of conversio n of labour income such