Small Business Fetishism Could Cost Us Jobs Post-Pandemic

Small business are the engine room of Australia, the backbone of our economy, the hope of the side. They were employed by the former treasurer. Now premier Scott Morrison to justify special treatment for small-sized businesses A position which is shared by all leaders in every political party, from Labor through One Nation to the Australian Greens

It’s the same belief that is behind an array of subsidy and grants, as well as free advice programs. And preferential tax treatment, such as

  • Tax exemptions for payroll tax
  • A lower company tax
  • Tax breaks on personal income for individuals who are not incorporate
  • Exemptions under prescribed situations exempted from tax on capital gains
  • Capital investments that are tax-deductible up-front

simpler arrangements to pay the tax on goods and services. What’s unique concerning this engine room of the economy theory is the total lack of evidence to support it. The advocates point out the huge amount of employees working in small companies.

Based on the Bureau of Statistics most recent count (in which small companies are define as having less. Then 20 workers) the number of employees was 4.67 million people at June 30, 2020. This is equivalent to 37.7 percent of the total workforce.

The Engine Room That Eliminates Jobs

The thing that is not often discuss is the fact that the figure of 4.67 million is less than. It has been every single one of the last 13 years. In no time over the last 13 years has more Australians worked in small enterprises than June 2007. Instead of being the main engine of jobs, small-scale business has been responsible. For job loss by not creating a single net new job the last 13 years.

The number of small-sized companies employed has dropped 6.3 percent over the past 13 years, during which employment in medium-sized enterprises has grown by 46.4 percent and the number of employees in large enterprises has risen by 48.4 percent. Also, the instant asset write-off advanced to small-sized businesses in the 2015-16 budget contributed to boosting the amount of capital expenditures made by small companies.

Capital expenditures for fixed assets of small-sized businesses decreased by 16.1 percent in the period between 2014-2015 (the year prior to the immediate writing-off of assets) between 2014-15 and the year 2018-19 (the year prior to the pandemic) This is a far greater reduction than that in capital expenditures by medium-sized enterprises (2.7 percent) and large companies (6 6 percent). Another myth that is widely believed is that small companies are more creative.

Inefficient, Less Creative Business

Although some small-sized businesses are innovative, ABS studies of innovation activity have repeatedly found that small companies are more likely to not engage in any kind of ingenuous activities than large or medium-sized enterprises. Smaller businesses have lower productivity firms than larger ones.

The ABS estimates the gross value added per employee in small-sized business at around $24,000 that’s 21% less than that of all companies for 2019-20. The value added per employee for large firms was $41,000, which is 36% more than the average.

The lower productivity could be a reason that, in the year 2019-20, small companies paid their employees just 35 percent less than the average salary or wage paid by all companies. Medium-size companies were paid around 12percent more, while big companies paid nearly 34 percent more.

The obvious conclusion that I have outlined more thoroughly in my latest article of The Australian National University journal Agenda is. That the commonly held notion that small-sized businesses are an engine room of the economy. Is in fact a lie and so is the implication that providing more assistance to small companies just because they’re small is an effective option to boost employment, investment, as well as economic development.

Not Many People Are Keen To Pay Business Tax

One thing that small-scale businesses aren’t particularly adept at is paying the mandatory tax. It is report that the Australian Taxation Office Tax Gap program reveals. That small companies (which they define as having who earn up to $10 million annually) were able to pay only 86.3 percent. Of their personal and company tax they ought to have paid had they completely complied with the rules of tax law for 2018-19.

This is greater than any tax gap estimated for by the ATO. The ATO found that wealthy individuals willingly paying 91.4 percent of what would paid had they adhere to the rules. Large corporations paid 91.7%.

According to the Tax Office numbers suggest small companies made up 49 percent of what it defines as uncollected tax. Large corporations and wealthy individuals made up only 10 percent and the tax office estimates 3%

This is also strikingly in contrast to the widely-held belief that small-sized businesses are discriminate against. Through the ATO and that the fiscal issues in Australia would be solve. If the only the top end of town was paying their fair share of tax.

During The Pandemic, Smaller Companies Needed Help

However, that doesn’t mean the vast assistance given to small-scale businesses during COVID-19 was not justified. Small-scale businesses comprise an disproportionately large portion of all the sectors. That were most severely affect by the restrictions that were impose to thwart COVID-19. Hospitality is one of them.

If governments had not provided the massive support to small-scale businesses that they did and it is very likely. That the economy would have shrunk by more as well as. The rate of unemployment would’ve been higher to a higher level in the middle of the year. It is crucial to make sure that this support doesn’t get root.

Policies that extend the life of small enterprises which are, as we have noted generally. Have lower productivity that larger enterprises can slow the pace at. Which production elements are able to shift to more productive use within the industries and across the entire economy.