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Small Business Growth and Tax Policy in Canada—A Theoretical Model

Author

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  • Khaled Soufani

    (Department of Finance, John Molson School of Business, Concordia University, 1455 de Maisonneuve Blvd. West, Montreal, Quebec, Canada H3G 1M8)

Abstract

The author develops a theoretical model for considering the impact and the compliance costs of taxation on the liquidity and the financial situation of small firms in Canada. The model addresses the tax burden that faces small firms at their different stages of growth and development, but the emphasis is on the start-up phase where small firms need more cash or liquidity relative to businesses at more developed stages of the business life cycle. It is recognized that one of the ways of bolstering the availability of cash and short-term liquidity for small firms is to offer them tax incentives and to design a system that reduces their compliance costs. The author looks at the importance of the small business sector and the stages of development and growth of firms; presenting the small business tax policy, and then providing some policy and managerial recommendations. The author's intention is not to measure direct tax and compliance costs, but simply to reflect on some key policy parameters.

Suggested Citation

  • Khaled Soufani, 2003. "Small Business Growth and Tax Policy in Canada—A Theoretical Model," Environment and Planning C, , vol. 21(4), pages 567-578, August.
    • Handle: RePEc:sae:envirc:v:21:y:2003:i:4:p:567-578
    DOI: 10.1068/c0322
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    References listed on IDEAS

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    1. Watson, Robert, 1990. "Employment Change, Profits and Directors' Remuneration in Small and Closely-Held UK Companies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 37(3), pages 259-274, August.
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