Around the globe, a gap between the wealthy and poor created by the difference in income is becoming a serious issue. The main reason behind it is shortcomings in taxation that can lead to the increased number closures of small businesses. .
Money obtained from imposing taxation on businesses money is used by the government to raise revenue for its expenditures. Large companies and organisations with huge incomes shift profits to countries with low taxes thereby saving enormously. However, small businesses are not capable of doing it as it requires seeking a long-term goal that can guarantee constant flow of income. Therefore, owners of smaller companies pay the same taxes as huge enterprises do. For example, FedEx Corporation avoided paying taxes for about three years applying tax avoidance strategies, while owners of flowers shops and bakeries were to pay imposed taxes regularly. As a result, taxation system that can be circumvented leads to income inequality.
The imperfection of the taxation system has a negative impact on small businesses.. Being burdened with paying bills, organisations with low volume sales are not able to invest in a company development. Therefore, more and more companies are closing down. By contrast, industries that are not affected by levying taxes continue to develop. For example, Shopko, an American retailer, closed down just after a month it started its business. Lacking enough funds to cover expenses, the owner declared bankruptcy. A large number of stores went bankrupt for the same reason.
To conclude, the issue of income inequality is becoming more serious in different countries around the world. Being mainly caused by tax uncertainty, a growing gap between the wealth and poor leads to businesses closing down.