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| Tekijä: | Henrekson, M. Sanandaji, T. |
| Otsikko: | Entrepreneurship and the theory of taxation |
| Lehti: | Small business economics
2011 : SEP, VOL. 37:2, p. 167-185 |
| Asiasana: | companies entrepreneurship taxation labour supply capital costs |
| Kieli: | eng |
| Tiivistelmä: | Examination of the literature on firm taxation shows that the economics of entrepreneurship has not been taken into sufficient consideration. This paper inspects how this affects conclusions derived from standard capital taxation models in entrepreneurial income context. Some defining features of entrepreneurship helping the analysis of the effects of owner-managed firms' taxation are identified, including the lack of a well-functioning external entrepreneurial effort market, limited access to external capital and complementarities between entrepreneurial innovation, effort and capital. Resulting from these constraints, the entrepreneurial project is tied to the individual owner-manager. The entrepreneur can't decouple saving decisions from investment decisions, hence makeing joint decisions on the supply of effort and capital. Therefore, the return from entrepreneurial ventures can not be readily divided into labor and capital income, contrary to what is typically assumed in taxation theory. It is argued that distinct attributes of entrepreneurship taken into account, certain conclusions of capital taxation models might no longer hold, the neutrality of capital taxation in owner-managed firms amongst others. Cost of capital formulas derived from the public firm behavior could underestimate distortions when applied to the entrepreneurial investment behavior. For tax purposes and also otherwise, it becomes useful to analyze return to entrepreneurial activity as income of a distinct production factor. In this context, conceptual topics and the difficulties of measuring entrepreneurial income are discussed. |
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