Portuguese Startups

: benefits and consequences of a model of tax deferral

Abstract

Evidence shows that startups create jobs, add value and play a vital role in the economy of every country, but these startups face several difficulties resulting in a high rate of failure all over the world, with millions fading each year and millions not getting the proper funding to even start. Hence, this lack of financial liquidity and funding is one of the main reasons for these failures and startups that find proper sources of finance tend to survive longer than the others. The purpose of this study was to investigate the effects of a different taxation model based on tax deferral and whether it would impact the startups’ financial situation and allow them to survive the initial years of their activity. This model would be an incentive and a support given by governments, who would initially abdicate tax income but would have it repaid in case the firms survived. To reach this purpose, the Portuguese context was studied, introducing only a deferral of taxes, with the tax structure remaining the same. It was then accounted the impact to the Portuguese government and applied to a representative set of companies. Another aim was to conduct a qualitative and quantitative research on the benefits of this model through the collection of the opinion of specialists and through the realization of surveys. The results demonstrated that if companies were free of taxes during their initial years of activity they would have had an increased financial liquidity that could be important for the firm’s survival while acting as an incentive for the starting of new businesses, without prejudice of the state. Moreover the opinions of the experts and the survey’s results are favorable to the benefits of this model.

Date of Award	Jun 2012
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Mário Valente (Supervisor)