Increasing Tax Revenues: Do Start-up Cost, Time and Procedures Matter?

• Main Author: Kafigi Jeje
• Format: Article
• Language: English
• Published: Danubius University 2020-12-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: entry regulations; cost; time; procedures
• Online Access: https://dj.univ-danubius.ro/index.php/AUDOE/article/view/623/938

A competitive business environment is one of the major contributors in the advancement of economic growth. This is a business environment that encompasses competitive industries whose friendly entry regulations aim at encouraging enterprises to formalize their business in order to compete, grow, and ultimately attain sustainability. The government benefits from the competitiveness, growth, and sustainability of these players. The benefits are translated in terms of the increased tax revenues collected from registered enterprises. Little is known as to whether the entry regulations have any relationship with tax revenues. Literature confirms that the entry regulations are mainly defined in terms of cost of start-up procedures incurred, time spent, and procedures undertaken when establishing a new business. Therefore, this study sought to establish the contribution of cost, time, and procedures on tax revenues. The study relied on data from 100 countries, for a period of 2010 to 2017. The multiple regression analysis confirms that the number of procedures negatively relates with tax revenues. Similar relationships exist between cost and tax revenues for 2010 to 2012, but not 2013 to 2017. However, relationships between time and tax revenues do not exist. The study suggests that governments need to devise and adopt initiatives that seek to relax entry regulations particularly the reduction of cost and procedures in order to encourage more business registrations and eventually, increase employment and government revenues. It is also suggested that care should be taken when relaxing regulations in order to stimulate innovative entrepreneurship, and discourage entry of non innovative ideas in the markets.