Ah, yes, but if you have a reasonably sizeable VAT, then people have an incentive to keep a paper trail. Otherwise, they might find that the VAT that other people have invoiced as having paid to them exceeds their own markup. Which would be bad for the continued viability of their business as a going concern.

Besides, you can't borrow against future cash flow without paper trails. So large and medium-sized firms have an incentive to keep an audit-able paper trail. Particularly if you audit the banks to make sure that the money they issue is backed by an auditable future cash flow.

Small business have cashflows in cash. But small businesses don't do control fraud or aggressive accounting. They do conventional man-with-suitcase fraud, or simply don't disclose their incomes.

- Jake

Friends come and go. Enemies accumulate.

But they don't steal from their business. They steal from everybody else's business. That's sorta the point.

- Jake

Friends come and go. Enemies accumulate.

When the contracting company for which I worked more than 17 years was contemplating turning itself into an Employee Stock Ownership Plan company I was discussing the negative attitudes of some of my fellow employees with the ESOP advisor. The problem was that the four partners were seen as having appropriated company property for personal use. All four had extensively and expensively remodeled their homes and things such as new electrical service panels had gone through the warehouse even though we did not use such products on any of our jobs. I just figured that that was something that would stop after ESOP conversion, but others were more skeptical. The advisor told me: "The owners of small companies always look on the company as their personal piggy bank." In this case all four were expected to only loot about the same amount each.

"It is not necessary to have hope in order to persevere."