As the tax filing deadline is nearing, it’s worthwhile to think about the vast amount of time it takes business owners to handle tax responsibilities. According to an April 12th hearing statement of Senator Max Baucus (D-Mont.) regarding tax administration practices from around the world, small business owners in the U.S. spend on average about 23 work days each year on their taxes. This means they effectively have to take three weeks off from work so they can meet their tax obligations.
In comparison, it only takes a business owner in Ireland 9.5 days a year and, in Canada, 15 days a year.
Overall, the U.S. ranks 62nd in ease of paying taxes for businesses; the UK ranks 16th, while Hong Kong ranks 3rd.
The tax burden is eroding productivity because it is taking up precious time that could be devoted to marketing and other activities to generate revenue. In effect, the government is shooting itself in the foot when it comes to generating revenue; if the compliance burdened were lessened on businesses, they could earn more revenue and pay more taxes.
Even the IRS in its instructions to Form 1040 and supplemental forms admits that it takes a “business filer” (someone filing Schedule C, C-EZ, E, F, or Form 2106 or 2016-EZ) on average 32 hours to keep records, do tax planning, complete the return, submit it, and do other tax-related chores. These business filers account for more than 30% of all individual filers.
The National Small Business Administration released a survey on April 11th, which found that 87% of owners needed to use outside accountants or other tax preparers for compliance. Again, this may save owners time, but it costs money that could be used by businesses for other purposes.
Bottom line: Taxes cost businesses a lot of time and money (no news to business owners). Very few business owners can afford the time off for a three-week vacation on a tropical isle, let alone three weeks to do taxes.