The Corona-Crisis taught us, how important it is, to be equipped with financial reserves in every case. Now, one asks himself: Why did sole proprietorships and small entrepreneurs not build up these reserves? To my mind, it is a matter of the system – and over all a matter of the taxation system in Austria.

In times of Corona a significant design fault comes to light. As a sole proprietorship we have to fully tax every profit as a private person. On the contrary, the capital companies have the possibility according to the tax law , to build up tax-saving reserves and therefore get through difficult times like this. Sole proprietorship and small enterprises do not have this possibility. We can now see the effects.

More advantages for the big ones?

Instead of building up a financial cushion before taxes in good times, there is only the inefficient path of building reserves after taxes. Many businessmen did that, for sure. But this method comes with a crucial disadvantage against the big ones. While big companies can finance business expenses from reserves, so to speak before taxes, the small ones have to fall back on already taxed money, so that the bills and/or salaries can be paid.

The leeway – which leeway?

Through those regulations, the small entrepreneur loses a lot of financial leeway, because it has already been handed over to the tax office in the past. One automatically becomes a supplicant, although provisions were made in good times. I personally regard this to be a great injustice, but what could be the solution? I am not an accountant, but why does the legislator not create the possibility of building up reserves in a tax-efficient manner, even for a sole proprietorship or a small enterprise? What is your opinion on that topic? Am I right or is there a mistake in my thoughts? I am looking forward to an exchange! You can either write me at gerhard@pramhas.eu or use the contact form.