Principles and practice of taxing small business

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Document type
Working Paper
Adam, Stuart; Miller, Helen
Institute for Fiscal Studies
Date of publication
10 December 2019
IFS Working Paper. W19/31
Small business & enterprise: the practicalities of running a small business and the theory of entrepreneurship, Trends: economic, social and technology trends affecting business
Business and management
Material type

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The UK taxes business income at much lower rates than employment income.

This paper describes the problems caused by that differentiation and assesses the main arguments used to defend it. It summarise the Mirrlees Review’s proposals for radical reform that would align tax rates across legal forms while protecting incentives to save and invest. Finally, it considers the obstacles to implementing such a radical reform and suggests an approach to making progress in practice.

This paper is a draft of a chapter to appear in G. Loutzenhiser and R. de la Feria (eds.), The Dynamics of Taxation: Essays in Honour of Judith Freedman, due to be published by Hart Publishing in Summer 2020.

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