Using a panel of administrative data and
regression discontinuity analysis, this paper examines how
the introduction of preferential tax regimes for Georgian
micro and small businesses in 2010 affects formal firm
creation and tax compliance. The results show that the new
tax regime for micro businesses increased the number of
newly registered formal firms by 18-30 percent below the
eligibility threshold during the first year of the reform,
but not in subsequent years. The analysis does not find an
effect of the new tax regime for small businesses on formal
firm creation in any year. Policy makers are often concerned
about abuse risks stemming from differentiated tax treatment
of micro and small businesses. The analysis in this paper
reveals reduced tax compliance in 2010 around the micro
business eligibility threshold, but does not find
significant evidence of reduced compliance by Georgian firms
in later years. The results also do not show any significant
evidence of strategic sorting around the regime eligibility thresholds.
Authors and Publishers
Bruhn, Miriam
Loeprick, Jan
World Bank Group (WB)
The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the ordinary sense but a unique partnership to reduce poverty and support development.
Data provider
World Bank Group (WB)
The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the ordinary sense but a unique partnership to reduce poverty and support development.