NEWSRELEASE
For Release: April 27, 2005 Small Business Needs A Less Complex And Confusing Tax Code Increasing Education, Compliance Assistance Will Reduce “Tax
Gap” WASHINGTON, D.C. - A confusing and complex tax code is at the heart of why
the typical small business with fewer than 20 employees spends over $1,200 per
employee to comply with tax paperwork, recordkeeping, and reporting
requirements. It is also much of the source of the so-called “tax gap” of
uncollected revenue from small businesses, according to testimony given today by
Thomas M. Sullivan, Chief Counsel for Advocacy of the U.S. Small Business
Administration before the U.S. House of Representatives Committee on Small
Business. In his testimony, Sullivan noted that “Small businesses, as defined by the
SBA size standard, make up over 99 percent of all U.S. businesses and employ
over one-half of the American workforce. Perhaps even more importantly, small
firms create over two-thirds of the net new jobs annually, and recently led the
American economy out of a recession. Yet, small business accomplishes this even
while facing a regulatory compliance burden that is roughly 60 percent greater
per employee than that faced by larger firms, and a tax compliance burden more
than twice as large.” He added, “At issue then is how compliance can be improved and the tax gap
narrowed without adding to the burden of small business. My office favors a
balanced approach-- one that includes commensurate doses of education,
compliance assistance, and enforcement.” Sullivan said that the source of the so-called “tax gap” is, “the uncertainty
and confusion in how to comply that creates the biggest compliance burden. It is
also this uncertainty that increases non-compliance rates for small business
filers over what they would be under a simpler code.” He concluded, “The best way to ensure that small business compliance rates
increase is to simplify the tax code, thereby removing the ambiguity filers face
when determining what to report, and to increase education and assistance
programs aimed at informing small business owners what the IRS expects them to
do when preparing their taxes.” The Office of Advocacy, the “small business watchdog” of the government,
examines the role and status of small business in the economy and independently
represents the views of small business to federal agencies, Congress, and the
President. It is the source for small business statistics presented in
user-friendly formats and it funds research into small business issues. For the complete testimony send an email request to
Contact: John McDowell, (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 05-20 ADVO
Press Kit
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The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. For more information, visit
www.sba.gov/advo , or call (202) 205-6533.