Taxes, corruption, and entry

By Maksim Belitski, Farzana Chowdhury, S. Desai. Small Business Economics, 2016

144 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/f40b64f4067ec001b342785ab15c4c345cd0f516

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Citations in the corpus

National Business Regulations and City Entrepreneurship in Europe: A Multilevel Nested Analysis (2018, unknown): “More complex regulations can benefit rent-seeking politicians (De Soto, 1989) if they yield direct revenues and offer more opportunities to extract bribes (Belitski et al., 2016).”
Formal Institutions and Opportunity Entrepreneurship. The Contingent Role of Informal Institutions (2019, background): “To increase our knowledge of the differences in entrepreneurship levels among countries, the literature has incorporated the institutional component as a factor that either enables or hinders entrepreneurial activity (Belitski et al., 2016; Aidis et al., 2012; Stenholm et al., 2013; Minh and Hjortsø”
Impact of Personality Traits and Entrepreneurship Education on Entrepreneurial Intentions of Business and Engineering Students (2019, background): “The context lens allows us to frame entrepreneurship based on the circumstances, conditions, situations or environments that may enable or constrain it [38].”
Institutions and Entrepreneurship Quality (2018, methodology): “In developed countries with higher-quality institutions, corruption works as an additional tax (Belitski et al. 2016) and has a negative impact on entry when the corruption is in its fourth quintile (>1.5 see Fig.”