Entrepreneurship and tax policy under review

: insights from Portugal

Abstract

In a country where 99.9% of businesses are small and medium-sized enterprises (SMEs) and 96% are micro-enterprises, Portugal’s entrepreneurial ecosystem is a cornerstone of its economy. However, with a tax system ranked 35th out of 38 in the 2024 International Tax Competitiveness Index there seems to be significant barriers to entrepreneurial activity. This thesis investigates how tax policy influences entrepreneurship, focusing on the demographic characterization of Portugal’s entrepreneurial ecosystem, the impact of tax policy on strategic business decisions, and the behavioural dynamics related to compliance, tax planning, and potential evasion. Through a mixed-methods approach, including 12 expert interviews and a survey of 153 entrepreneurs, the findings reveal critical insights. An overwhelming 81% of respondents identified tax policy as a barrier to starting a business, while trust in tax authorities scored a low mean of 4.24 out of 10. The perceived complexity of the tax system (mean = 7.85) further emerged as a key obstacle, disproportionately affecting SMEs and startups. Regarding compliance, 65.4% of respondents admitted to engaging in unconventional methods to minimize tax liabilities. This study also framed tax planning as a dynamic capability. This study ultimately aims to inform the development of a more competitive tax system in Portugal, addressing the Research Question: How is tax policy a factor influencing entrepreneurial activity in Portugal?

Date of Award	4 Feb 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Peter V. Rajsingh (Supervisor)