A study, Taxation of SMEs in OECD & G20 Countries, issued by the OECD recognises the strong contributions from SMEs to economic growth and employment. The distinct challenges faced by SMEs such as high compliance costs and access to finance is also acknowledged.

The OECD report assesses the impact of tax policies on the creation and growth of SMEs, analyses the role and characteristics of SMEs in the economy and reviews the taxation of SME income. The report also outlines that tax systems can influence the creation and growth of SMEs in several ways such as:

• Tax compliance costs are proportionately higher for SMEs than for larger firms.
• The taxation of SMEs provides incentives for SMEs to incorporate.