Small business tax: government regulations
When governments impose regulations on small businesses that increase the cost of doing business, it is like imposing a tax. Google’s dictionary defines tax as “a compulsory contribution to state revenue, levied by the government on the income of workers and company profits or added to the cost of certain goods, services and transactions.”
And when these regulations hit small businesses the hardest, it’s like imposing a tax on small businesses. That’s why whenever small businesses are surveyed, as per Gallup, business owners routinely place the regulatory burden at or near the top of the concerns. And it’s not just the perception of business owners. As Professor Scott Shane has pointed out in the past here on Small Business Trends, researchers and even World Bank studies have shown that regulations negatively impact small businesses in four ways:
- Regulatory compliance imposes a disproportionate burden on small businesses, as they do not have as much revenue on which to spread costs as large businesses.
- Regulations make small businesses less competitive compared to foreign competition.
- Regulations add uncertainty, preventing small businesses from investing in capital purchases, services, and hiring.
- New regulations add complexity and often have unintended consequences.
The following new infographic from chamber of commerce website illustrates the impact of regulation on small businesses:
Click to zoom the image of the small business tax infographic
Note that the cost per employee to comply with the regulations is $ 10,585 for small businesses with less than 20 employees, but only $ 7,755 for large businesses. Almost 90% of businesses in the United States have fewer than 20 employees, meaning the vast majority of businesses are negatively affected – small businesses paying over 36% more per employee.
According to Tyler Shears, an executive at ChamberofCommerce.com, âWe created this infographic to raise awareness about an issue that’s important to us and millions of other small businesses. We are a small business ourselves and we serve small businesses. The business owners we hear about who are in the competing trenches devote their savings to developing innovative products and services, hiring more staff, and growing a business for the benefit of family, employees and the community. . So we were concerned to see how regulations and compliance hit small businesses harder. “