The EY G20 Entrepreneurship Barometer 2013

Tax and regulation

EY - Tax and regulation
  • Share
 

Tax and regulation are key levers for improving a country’s business environment. Countries that offer favorable tax rates, simplify procedures and provide entrepreneurial support will more likely enjoy high numbers of startups.

In turn, these ventures become significant creators of jobs and tax revenue as they progress up the growth curve.

EY - Chris Sanger
Chris Sanger, Global Tax Policy Leader at EY discusses tax and regulation.

Target reforms and incentives for each step of the entrepreneur’s journey
Policies must be designed to support early-stage and more established entrepreneurial ventures. For example, reducing indirect taxes (such as payroll taxes) would often be more helpful to early-stage businesses than reducing corporate income taxes.

Later, simplifying rules to help companies raise equity and debt capital can help their transition to the rapid-expansion phase.

Reduce the administrative burden of tax and regulation
The sheer complexity of tax administration places a significant burden on entrepreneurs. Simplifying tax codes might be as impactful as reductions in headline tax rates, especially for smaller businesses. Early-stage companies in particular would benefit from relief on indirect taxes, which often serve as a fixed overhead expense.

Creating convenient online hubs to help busy entrepreneurs navigate regulations can help them get going more quickly.

It is also important to create certainty and predictability. It is difficult for businesses to invest if there is doubt about whether the rules will change.

Give entrepreneurs a voice on reform
Entrepreneurs want more of a say in defining regulation, but they lack the lobbying resources of large companies.  By listening to entrepreneurs through forums and other feedback mechanisms, governments can do more to ensure entrepreneurs are not overlooked. In this way, governments can also minimize the impact of unintended consequences from new rules.

“Brazilian entrepreneurs, whilst managing a fast-growing company, have the challenge of dealing with multiple taxes and their frequent changes.”

— Luiz Mattar, TIVIT, Sao Paulo, Brazil

EY - Tax and regulation

A call to action

Governments

  • Reduce the indirect tax burden
  • Simplify the tax system
  • Give entrepreneurs a voice on regulation
  • Simplify insolvency rules
  • Stimulate innovation

Entrepreneurs

  • Use tax simplification methods to improve cash flow and decrease compliance costs associated with paying taxes
  • Explore government resources
  • Know your R&D incentives
  • Get involved

Corporations

  • Share your public policy experience
  • Drive change