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How can taxes affect a business?

When it comes to business and finance, we have to deal with taxes.

Tax seems complicated to me so I just want to know how taxes affect a business. I'm looking for the general answer overall and you don't have to explain to me the fine details. I don't want to get confused and would just like to know the basic answer of how taxes affect businesses.

Thank you.
Posted in Business & Commerce, asked by Inila, 6 years ago. 1158 hits.


Taxes affect business on all the financial levels in its operations.

As all businesses rely on income and growth, taxes will have a direct and indirect impact on this. Certain countries will have tax laws that make it difficult for businesses to grow, while other countries will have tax laws that make it easier for them to grow.

It’s important as a business to understand the requirements of the taxation laws as a slight misunderstanding can result in business failure.Think of finance management, it has to be precise in order to pay correct taxes. Thus in itself requires funs, thus driving up the need for more income and in turn driving up the payment of tax. In this sense tax has some potential to motivate a business toward growth.

On a second note, a business needs profit to sustain its growth. Depending on the tax laws, this can make certain business thrive while others struggle to compete against the market giants.

Either way, tax will have a negative or positive impact on businesses.

Some negative impacts include:

  • Financial pressure
  • Reduced profits
  • Increased expense
  • Business collapse

Some positive outcomes are:

  • Increased growth by means of government facilitation
  • Sustainability by means of tax grace or brackets
  • Increased profits by means of government funds and grants. Ultimately these are also funds that are paid from the tax of larger business corporations.

In a similar way, tax can also go on to affect people on a personal level. A business that is thriving will grow to employ people providing jobs. Likewise, a business under taxation pressure may collapse costing people jobs.

6 years ago
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