Using macro level panel data, we examine the effects of taxation and tax progressivity on entrepreneurship in a large group of European countries. We address two main objectives. First, we try to explore whether tax increases discourage entrepreneurial activity, focusing on new self employment (nascent entrepreneurship). Second, we investigate the impact of tax progressivity on entrepreneurship, again focusing on the impact on new self employment. We find that tax progressivity at higher than average incomes has a robust negative effect on nascent entrepreneurship. We discuss the policy implications of our results.

Using macro level panel data, we examine the effects of taxation and tax progressivity on entrepreneurship in a large group of European countries. We address two main objectives. First, we try to explore whether tax increases discourage entrepreneurial activity, focusing on new self employment (nascent entrepreneurship). Second, we investigate the impact of tax progressivity on entrepreneurship, again focusing on the impact on new self employment. We find that tax progressivity at higher than average incomes has a robust negative effect on nascent entrepreneurship. We discuss the policy implications of our results.

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