Tax Compliance Costs of Small Businesses 2004: Improving the Estimates

Inland Revenue has an ambitious program of tax compliance cost re-search. It has two major aims: • First, a prospective purpose of providing information to help fore-cast the expected compliance cost impact of proposed tax initiatives. • Secondly, an evaluative one, measuring the impact of actual changes on the tax compliance costs faced by businesses. In particular:- by how much and in what direction do compliance costs change?- which elements of compliance costs change?- which groups of taxpayers are affected? The research focuses on the tax compliance costs of small and medium-sized business (SME’s) and it has been designed to respond to policy propos-als as they arise over the next 5-10 years. The starting point was this major benchmark survey quantifying in dollar terms the tax compliance costs of small and medium businesses. Because the work sits in an applied policy context, we found that its focus differs in small but important ways from previous compliance costs research. This paper describes some consequential conceptual and defini