OECD Science, Technology and Industry Working Papers

The OECD Directorate for Science, Technology and Innovation (STI) leads OECD research on the contribution of science, technology and industry to well-being and economic growth. STI Working Papers cover a broad range of topics including definition and measurement of science and technology indicators, global value chains, and research on policies to promote innovation. These technical or analytical working papers are prepared by staff or outside consultants to share early insights and elicit feedback.


Taxation, SMEs and Entrepreneurship

This paper discusses the implications of tax policy for the growth of entrepreneurship and small and medium-sized enterprises (SMEs). Some existing features of OECD tax systems are biased against entrepreneurs and small firms. For instance, double taxation of distributed corporate profits can discourage incorporation of small firms while it can also favour debt over equity financing, the latter most required by SMEs. Conversely, a number of OECD countries have features in their tax systems that favour selfemployed individuals and SMEs to encourage growth. These include lower corporate income tax rates, exemptions from value-added taxes and investment tax credits. It is, however, not clear that the benefits of preferential tax treatment of self-employed individuals and SMEs outweigh the costs of moving away from tax neutrality. There are a number of areas where OECD governments can improve the tax climate for small firms and entrepreneurs. They can reduce progressivity in personal ...


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