Taxes, the tax administrative burden and the entrepreneurial life cycle

Pontus Braunerhjelm, Johan E. Eklund () and Per Thulin ()
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Johan E. Eklund: Jönköping International Business School and Blekinge Institute of Technology

Small Business Economics, 2021, vol. 56, issue 2, No 9, 694 pages

Abstract: Abstract We present a modified version of the entrepreneurial choice model, where it is shown that the expected utility of becoming an entrepreneur is decreasing in both the levels of taxes and the tax administrative burden. We extend previous empirical findings by examining how these variables influence entrepreneurs at different stages in the entrepreneurial life cycle. Our findings imply that the effect of the tax administrative burden varies over the entrepreneurial life cycle from strongly negative to insignificant. The most pronounced negative effects appear in the early stages of entrepreneurship. We conclude that a 10% reduction in the tax administrative burden increases the propensity for new business establishments by 4%. Our findings support the idea that tax simplification is one way to encourage entrepreneurship, without any reduction in tax revenues.

Keywords: Tax complexity; Tax administrative burden; Entrepreneurship; Life cycle (search for similar items in EconPapers)
JEL-codes: H25 J24 K34 L26 M13 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11187-019-00195-0

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