Does Taxation Foster Entrepreneurship across Western Balkans Countries? Empirical Evidence across 30 Years.

In developing economies, which aim to join the European Union in the upcoming future, entrepreneurial endeavors are important and defining for their economic growth. Most of the time, potential investors are incentivized to choose a particular market through tax benefits, tax exemptions, streamlined registration procedures, tax systems and less red tape. By means of panel data modeling, we investigated the relationship between entrepreneurship and taxation-related matters on a sample of six economies from the Western Balkans region during the period 1991‒2021. Overall, empirical results showed that increasing registration costs hindered the creation of new businesses in the region. Still, if other taxes payable by businesses increased while authorities provided substantial tax reliefs, the creation of new companies would continue. At national level, we found that taxation often fuels entrepreneurship and improves new business density rates. Relevant policy implications are also addressed. [ABSTRACT FROM AUTHOR]