Taxes, corruption, and entry

Maksim Belitski (), Farzana Chowdhury () and Sameeksha Desai ()
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Maksim Belitski: Whiteknights, University of Reading
Farzana Chowdhury: Indiana University
Sameeksha Desai: Indiana University

Small Business Economics, 2016, vol. 47, issue 1, No 11, 216 pages

Abstract: Abstract Tax policies and corruption are important institutional considerations which can shape entrepreneurship. We investigate how tax rates, and the interaction between corruption and tax rates, influence variations in entry across a panel of 72 countries in the period 2005–2011. We use a series of panel estimations as well as several robustness checks to test these effects, using relevant controls for economic development, the size of the state, and other regulatory and tax policy measures. We find that higher tax rates consistently discourage entry. Further, we find that although the direct influence of corruption on entry is also consistently negative, the interaction influence of corruption and tax rate is positive. This indicates that corruption can offset the negative influence of high taxes on entry. We discuss the implications of our findings for policymakers and future research.

Keywords: Corporate tax; Tax administration; Entrepreneurship; Corruption; Institution; L26; H29; O50 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (53)

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DOI: 10.1007/s11187-016-9724-y

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