Literature review on taxation, entrepreneurship and collaborative economy
06.2016 - 04.2017
Many factors affect entrepreneurship creating the so-called "business environment" or "entrepreneurial ecosystem". Such factors include taxation, other government regulations (e.g. rules on bankruptcy and restrictions to enter certain professions), local and global market opportunities, access to funding and finance, the role of universities and of education and training as catalysts, the function of mentors, advisors and support systems, the attitudes, skills and human capital of the workforce.
As entrepreneurship is one of the channels through which economic development takes place, governments around the world create policies to stimulate entrepreneurship as a means to create new employment opportunities, reduce poverty and foster innovation and economic growth. Promoting entrepreneurship is also one of the priorities of the European Commission, in line with the objectives of the Single Market. The European Commission promotes entrepreneurship through action plans, which - among other initiatives -include funding for entrepreneurship education, promoting opportunities for women through gender-sensitive policies, easing administrative requirements and fostering productive investments.
On a different note, government interventions in market economies can significantly influence both the behaviour and the welfare of entrepreneurs, thus having an impact on the size and composition of the entrepreneurial sector. Public policy intervention is justified on the ground that entrepreneurs generate important positive social and economic externalities via innovation, i.e. the development of new technologies and new products, new employment opportunities and an enhanced level of competitiveness and productivity of the economy. The risk and difficulties of taking up entrepreneurial activity is high and if entrepreneurs are unable to appropriate all of these benefits themselves, there may be too little private investment from the point of view of collective well being, motivating government intervention. Moreover, the allocation of entrepreneurial efforts can spread between productive (i.e. innovation) and unproductive (i.e. rent-seeking) activities. Public policy can influence the allocation of efforts by laws and regulations.
Objectives and general approach of the literature review
Taking into account: (a) the importance of promoting a business environment supportive of entrepreneurs and innovation; (b) the vast amount of research on the question of tax and entrepreneurship and its sometimes divergent findings; (c) the existence of several, still open tax-related questions raised by the growing importance of the collaborative economy, the research will provide a comprehensive and up to date literature review.
The review will be divided in two parts:
1) a comprehensive review on the extensive literature on taxation and entrepreneurship;
2) a survey of the existing literature on taxation and the collaborative economy.
Given the limited existing literature, the research will also develop an analysis of the practical tax experiences, as they can be crucial inputs into answering the relevant questions. Through triangulating these methods, we will look to provide insight against the following areas:
(a) The impact on individuals;
(b) The impact of tax on equal competition;
(c) The choice of tax policy; and
(d) Tax administration and compliance.
Directorate General Taxation and Customs Union (DG TAXUD)
IHS - Institute for Advanced Studies, Vienna (consortium leader), IEB, PwC