DP1166 The Taxation of Entrepreneurial Income in a Transition Economy: Issues Raised by Experience in Poland

Author(s): Dariusz Maciej Grabowski MEP, Stephen Smith
Publication Date: March 1995
Keyword(s): Entrepreneurs, Fiscal Policy, Small Businesses Poland, Tax Reform, Taxation, Transition Economies
JEL(s): H25
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1166

This paper considers the taxation of small business and entrepreneurial incomes in Poland. In both transition economies and existing West European market economies, the efficient taxation of entrepreneurial incomes presents particular difficulties, partly due to the absence of clearly defined `borderlines', for example between labour and capital incomes, and between business expenses and private consumption. The treatment of income volatility, of social insurance contributions, and of inheritance by the tax system can easily have a non-neutral impact on the balance between entrepreneurial investment and other investments. The paper considers how these problems could be addressed, and outlines a number of issues specific to the taxation of entrepreneurs in transition economies.