Small Business and Taxation Research Paper Example | Topics and Well Written Essays - 1750 words

Small Business and Taxation - Research Paper Example Taxes on capital or even on profits reduce incentives for businesses to their efforts in investing in new equipment, increasing their levels of return on investment. Most of the taxes resulting to adverse effects include corporate tax and business rates. These taxes also reduce entrepreneurial activity rate within the UK economy. Again, increased taxes on labor like national insurance to the employers reduce the abilities of small businesses to incorporate new staff. This is said to consequently lead to the reduction of headcount by small businesses, especially due to the high costs that are associated. Empirical pieces of evidence linking high labor taxation to increased employment or low employment seem to be very strong. From a global scope, the global economy is said to have recorded an annual contraction in 1946 as its first time. Recessions such as the case of the year 2009 were argued to have been the first recession during the globalization error. This happened with a widespr ead downturn, which spread through global trade as well as the connections of financial markets. The credit crunch is believed to have been the main factor that triggered the recession (Kirchhoff, 1996). Credit crunch led to the loss of confidence amongst banks within the banking system, especially in the UK.  Other effects caused by the credit crunch involved the collapsing pieces of evidence back lending markets, which resulted from high exposure of banks to vulnerable assets like residential mortgage backed securities.