Prague Economic Papers 2021, 30(2):171-188 | DOI: 10.18267/j.pep.766

Self-employment: Influence of Tax Incentives and Income Underreporting

Adam Adamczyk ORCID...a
a University of Szczecin, Szczecin, Poland

The aim of the article is to answer the question whether the tax benefits that can be obtained by the self-employed in Poland influence the decision to start their own business. In the study, the EUROMOD microsimulation model is used to determine tax benefits from self-employment. The estimated tax benefits are then used in a probit regression to explain the probability of self-employment. The survey is carried out for both original EU-SILC data and adjusted data, assuming that the income reported by the self-employed is underreported. The results of the survey based on the original data indicate that taxpayers make irrational decisions about taking up self-employment. This is because as the benefits of self-employment increase, the probability of self-employment decreases. After ad-justing the data on self-employed income with the underreported income, the results of the analysis lead to the opposite conclusion.

Keywords: self-employment, taxation, underreporting
JEL classification: H30, J08, J38, L53

Received: November 6, 2019; Revised: October 20, 2020; Accepted: December 7, 2020; Prepublished online: February 10, 2021; Published: April 14, 2021  Show citation

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Adamczyk, A. (2021). Self-employment: Influence of Tax Incentives and Income Underreporting. Prague Economic Papers, 30(2), 171-188. doi: 10.18267/j.pep.766
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