Does Tax, Financial, and Government Incentives Impact Long-Term Portuguese SMEs’ Sustainable Company Performance?

Sara Picas, Pedro Reis, António Pinto and José Luís Abrantes
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Sara Picas: Polytechnic Institute of Viseu, 3504-510 Viseu, Portugal
Pedro Reis: CISeD—Research Center in Digital Services, Polytechnic Institute of Viseu, 3504-510 Viseu, Portugal
António Pinto: CISeD—Research Center in Digital Services, Polytechnic Institute of Viseu, 3504-510 Viseu, Portugal
José Luís Abrantes: CISeD—Research Center in Digital Services, Polytechnic Institute of Viseu, 3504-510 Viseu, Portugal

Sustainability, 2021, vol. 13, issue 21, 1-16

Abstract: This article aims to assess how fiscal and financial incentives and government support conditioned the profitability of Portuguese SMEs between 2010 and 2019. The high tax and financial burdens on SMEs have consequences for sustainability and business development. Thus, the study analyzes different incentives provided by the Portuguese government to ease this burden and improve business profitability. The study uses panel data with fixed effects using five different sources of information from five internal tax grant types, three different European Union program financial subventions, and three national budget-specific expenses. The results obtained suggest that tax incentives influence the profitability of SMEs; however, government incentives do not have any impact. The QREN (financial) incentives positively decide the ROA and negatively impact the ROE, contributing to sustainable performance. Portugal 2020 incentives have a weak effect on the first years, improving in the following years. However, the incentive related to R&D is not relevant. This work aims to contribute to decision making for managers, shareholders, and government entities, allowing them to choose those measures that could increase the company’s added value, and for governments, as a tool to select incentives that will most benefit SMEs’’ profitability. This work identifies the key incentives that impact companies’ profitability.

Keywords: tax incentives; financial incentives; grants; profitability; government incentives; ROA; SMEs (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:21:p:11866-:d:665817

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