Do small businesses/sole traders normally avoid tax?

I think that's what NIC's are for more than tax, but both form part of PAYE. It's a bit of a joke that if you earn 20k a year as an employee you (and your employer) will pay more into NIC than a Ltd Company contactor earning £100k doing the minimum wage thing as you have described.

I was a contractor until about a decade ago, I paid myself £18k a year, so a good sized NIC stamp and a decent working wage, and the rest of my income came from divvies.

Worked next to a bloke who did the minimum wage thing and boasted about it while his wife had two children, with complications, all on the NHS. "my concience is clear" says he. i have also had 2 children, no complications, and have some idea of how much it cost to bring my kids into the world and the ongoing cost. tax on 18k a year isn't enough.

You could, of course, go a different route. do the minimum wage thing, and instead of paying extra NICs and higher rate of tax you donate the amount you might otherwise have paid in tax straight to some hospitals, schools and local charities operating in areas you wish to support. Now there's a thought.

 

Ultimately it is the customers who pay, when they buy goods and/or services from the large corporation.

 

Fair enough everyone pays VAT on their products, with money they have already paid tax on via their income. (Hello double tax). But the corporations are earning an income from those products but don't pay tax on that income, or as good as none.

But think about the likes of google who for example make money in a business to business transaction, where companies buy advertising from them. Those companies will get VAT back on the advertising expense (I think). So there is no taxation there on that service at all. Ok, there may be an increase in sales (but not guaranteed) but some companies advertise to keep themselves present in peoples mind rather than to directly increase sales. But think about a business to business service like IT support, its the same deal with no public facing product. In this case the lack of tax paid by the company is directly placed on the employees. The same goes for the likes of twitter, facebook, Rovio, who all offer a service in exchange for shoving ads in your face and/or tracking you across the web rather than something you buy.

 

You've missed my point. All the money the large corporation it gets by selling goods and/or services to customers. The company's income and the tax paid on it, together with the tax paid on their employee's salaries, comes from the customers.

 

Ok I see. Yes the customer is the source of the money, but I'm talking about how that money is taxed. Its essentially split between the work force and the business. The workforce pays the tax while the business does not or a very low share when compared to the workforce. Basically the difference in tax as a percentage of total earnings of a businesses income when compared to its workers income is very different and favours the business.

If there was no tax the customer would still be paying the same amount of money for the product or service, the business would just make more money. Thats how it works after all, you charge what the market is willing to bear in terms of price.