CFO: Small Biz, the Fiscal Cliff, and the Big, Bad Bank

As the clock ticks down on the fiscal cliff, small business wonders why it pays effective tax rates higher than Apple, Google, or Microsoft. Meanwhile, UBS is again revealed as a global fraudster.

By David Rosenbaum
CFO, Dec 27, 2012

According to a February 2012 survey sponsored jointly by three small-business advocacy groups, the American Sustainable Business Council, Main Street Alliance, and Small Business Majority, the greatest point of agreement (90%) among the 500 small-business owners they polled (50% self-identifying as Republicans; 32% as Democrats, and 15% as independent) was that large corporations using loopholes to avoid taxes “that small businesses have to pay” cause their own businesses to suffer.

“Small business,” says David Levine, chief executive officer of the ASBC, believes that “the [tax] rules are rigged against them.”

Big companies, Levine says, can register their intellectual property — trademarks, patents, and other creative assets — with offshore entities, charge large fees, take the cash, and send it to tax-favorable jurisdictions such as the Cayman Islands, Liechtenstein, and, of course, Switzerland, and “end up with no [taxable] profit in the U.S. and big [lightly taxed] profits offshore.”

Small businesses, obviously, don’t have the wherewithal to take advantage of this dodge. But more important than the annoyance of trying to compete on a playing field tilted in someone else’s favor, as Levin points out, is that the tax money the United States doesn’t collect obviously isn’t there to invest in the infrastructure that small businesses depend on. Nor is it available to the banks small businesses turn to when seeking credit. Nor does it flow through local economies to create the demand upon which small business either feeds or starves.

“What’s most grating to small business,” adds Scott Klinger, director of tax policy for Business for Shared Prosperity, an ASBC partner, “is when these large corporations say, ‘We’re just following the law.’” ...

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Copyright 2012 CFO Publishing