NBER Publications by Soren Bo Nielsen

The paper studies the effects of tax policy on venture capital activity. Entrepreneurs pursue a single high risk project each but have no own resources. Financiers provide equity finance. They must structure the entrepreneur's profit share and base salary to assure their incentives for full effort. In addition to providing equity finance, venture capitalists assist with valuable business advice to enhance survival rates. Within a general equilibrium framework with a traditional and an entrepreneurial sector, the paper investigates the effects of taxes on the equilibrium level of entrepreneurship and managerial advice. It considers dierential wage and capital income taxes, a comprehensive income tax, incomplete loss offset, progressive taxation as well as investment and output subsidies to...

Ignoring tax avoidance possibilities, a value-added tax and a cash-flow income tax have identical behavioral and distributional consequences. Yet the available means of tax avoidance under each are very different. Under a VAT, avoidance occurs through cross-border shopping, whereas under an income tax it occurs through shifting taxable income abroad. Given avoidance, we show that a country would make use of both taxes in order to minimize the efficiency costs of avoidance activity, relying relatively more on that tax that is harder to avoid. We then make use of aggregate Danish tax and accounting data from 1992 to measure the amount of avoidance that occurred under the two taxes. While the estimates of avoidance activity are small, the figures imply that Denmark could reduce the real ...