Comparative Study of Taxation Policy Reforms and Their Effect on Business Startups and Entrepreneurship

International Journal of Economics and Management Intellectuals [IJEMI]

Comparative Study of Taxation Policy Reforms and Their Effect on Business Startups and Entrepreneurship

Author : Dr. Markus Schneider

Open Access | Volume 2 Issue 5 | 2025 | Pages 24–33

https://doi.org/10.63665/ijemi-y2f5a003

How to Cite :

Schneider, M., "Comparative Study of Taxation Policy Reforms and Their Effect on Business Startups and Entrepreneurship", International Journal of Economics and Management Intellectuals [IJEMI], 2025, 2(5): pp. 24–33.
Journal Book

Abstract

Abstract - Tax policy is a prime driver of the entrepreneurial climate of any economy. This study compares assessment of tax reforms and their influence on business startup and entrepreneurial development in targeted economies. It examines how tax structure, tax rate, and tax administration, particularly corporate tax, value-added tax (VAT), and capital gains tax, affect startup formation, viability, and innovation. Using qualitative and quantitative research techniques, the paper contrasts emerging and developed economy experiences with emphasis on determinants of entrepreneurial behaviour across policy predictability, compliance regimes, and tax incentives. The paper illustrates that moderate, transparent taxation supplemented by good institutional conditions strengthens business confidence and new venture formalization. Conversely, repeated policy uncertainty, burdensome compliance, and unclear procedures discourage innovation and risk-taking. The report ends on the note of suggestions for policy in establishing an even balance of tax environment that would be business-friendly as well as financially wise.

Taxation reforms, Entrepreneurship, Startups, Comparative policy analysis, Fiscal incentives, Business environment, Economic development

Conclusion

A. Summary of Major Findings

This comparative study reveals that taxation reforms exert a profound influence on entrepreneurial activity and startup development across economies. Transparent, simplified, and innovation-driven tax policies tend to generate fertile ground for entrepreneurship, whereas rigid and unpredictable tax systems restrict business formation and risk-taking behaviour. Governments that combine moderate rate cuts, simplified digital compliance, and targeted incentives (tax holidays, R&D credits, startup exemptions) typically observe higher startup registrations, better access to investment, and improved innovation outputs.

B. Contribution of the Study

The research contributes a comparative, integrative perspective linking tax policy mechanisms to structural and behavioural dimensions of entrepreneurship. It highlights how governance quality and administrative capacity shape reform outcomes and argues for aligning fiscal strategy with broader innovation policy to maximize impact.

C. Limitations and Future Research

Although this study provides valuable insights, certain limitations must be acknowledged to ensure balanced interpretation. The comparative approach, while informative, is constrained by variations in data availability and policy documentation across countries. Differences in administrative reporting, informal economic activity, and political contexts may affect the comparability of observed outcomes. Moreover, the study primarily focuses on macro-level patterns and does not explore micro-level behavioural responses of individual entrepreneurs to specific tax reforms, which could yield further depth to the analysis.Future research could expand on these findings by conducting longitudinal studies that measure the long-term sustainability of tax-induced entrepreneurship. Additionally, integrating qualitative interviews with startup founders, investors, and policymakers would provide richer insights into how tax policies are perceived and navigated in real-world contexts. Cross-sectoral analyses examining how taxation affects innovation differently in technology, manufacturing, and service industries would also enhance policy precision. Lastly, as digital taxation and global e-commerce continue to evolve, future research should explore how international tax coordination and digital economy reforms influence startup ecosystems globally. These areas hold potential to refine the intersection between fiscal governance and entrepreneurial development, ensuring that future policy designs remain both competitive and inclusive.

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