Working Paper: CEPR ID: DP1166
Authors: Maciej Grabowski; Stephen Smith
Abstract: This paper considers the taxation of small business and entrepreneurial incomes in Poland. In both transition economies and existing West European market economies, the efficient taxation of entrepreneurial incomes presents particular difficulties, partly due to the absence of clearly defined `borderlines', for example between labour and capital incomes, and between business expenses and private consumption. The treatment of income volatility, of social insurance contributions, and of inheritance by the tax system can easily have a non-neutral impact on the balance between entrepreneurial investment and other investments. The paper considers how these problems could be addressed, and outlines a number of issues specific to the taxation of entrepreneurs in transition economies.
Keywords: taxation; fiscal policy; tax reform; entrepreneurs; small businesses; poland; transition economies
JEL Codes: H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax treatment of entrepreneurial incomes (H24) | Allocation of resources between entrepreneurship and other activities (L26) |
| Volatility of entrepreneurial incomes (D89) | Nonneutral tax impacts (H29) |
| Social insurance contributions (H55) | Distortion of investment decisions (G11) |
| Tax treatment of entrepreneurial incomes (H24) | Entrepreneurial investment decisions (G31) |
| Income volatility (D31) | Decisions regarding reinvestment versus personal consumption (D14) |