Identification of priority mechanisms for tax regulation of individual entrepreneurs by the method of laboratory experiment

Tikhonova Anna Vital'evna ORCID: 0000-0001-8295-8113 PhD in Economics Associate Professor, Leading Researcher, Department of Taxes and Tax Administration, Financial University 127083, Russia, Moscow, Verkhnyaya Maslovka str., 15, room 507 samozvanka_89@bk.ru Other publications by this author

Introduction

Entrepreneurship, according to the European Commission, is the ability of a person to transform a business idea into a real effective economic activity. This process involves creativity, initiative, innovation and risk-taking. Entrepreneurial competencies are understood as abilities along with knowledge in the field of activity. Thus, in general, entrepreneurship should be considered as a state of consciousness that offers a basis for human social and economic activity ^{[1, 2]}.

Identification of the entrepreneurial abilities of individuals, as well as the factors preventing this, is one of the relevant areas of research in domestic and foreign practice. At the same time, a laboratory experiment is often used as a method of study, which allows to study both behavioral and financial and administrative aspects of entrepreneurship. This gave the justification to conduct their own laboratory experiment.

The purpose of the study is to identify the importance of certain fiscal factors in starting your own business and developing entrepreneurship.

Research methods

The experiment presented in this study is compiled in the form of a conjugate paired profile, which is used by domestic and foreign scientists to conduct a laboratory experiment. More details about the feasibility of using such a questionnaire form and its compliance with the objectives of the experiment are written in the Research Report "Application of the methodology of tax experiments in the educational process to determine the optimal level of tax burden on individuals" (ruk. Tikhonova A.V.) ^[3].

When forming a sample for the experiment, we used the results of the scientific work of Romanian scientists A. Muntean and I. Gavrila-Paven, who justified the need to implement a database of graduates and obtain information from them about their professional life ^[4]. The authors' research is the starting point for a long-term project to determine the professional development of graduates, especially in the first years after graduation. For this reason, students of 3-4 courses with professional knowledge were included in the study to identify their entrepreneurial motives, as well as graduates who graduated from university a year or two ago to monitor their professional trajectory in the first years after graduation. The questionnaire for these two groups is located at the link: http://simpoll.ru/run/survey/86dd3c09 . In addition to this, the third group of subjects are active self–employed and individual entrepreneurs who will answer only that part of the questions of the experiment that allows you to assess the priority of tax instruments. The questionnaire is located at the link: http://simpoll.ru/run/survey/d86ebdd5 . Such a selective approach is justified by the fact that the third group are people who have already shown their entrepreneurial abilities in practice, comparing the result of their survey with the answers of the first two groups will allow us to correlate people's expectations from the tax system and the real attitude of business.

Participation in a laboratory experiment involves passing four elements of the questionnaire in one stage. The first part of the questionnaire includes 7 closed questions on the entrepreneurial abilities and aspirations of respondents. It allows the subjects to immerse themselves in the atmosphere of "entrepreneurship" and is aimed at obtaining more specific and reliable answers about the role of tax instruments in the development of small businesses. The first question "Would you like to engage in entrepreneurial activity (your business)?" was asked to students to divide the sample into those who have entrepreneurial goals and those who do not. Students and entrepreneurs who answered "yes" were accepted as potential entrepreneurs.

The second part is an experimental element of the survey, in which the subjects are immersed in 4 abstract situations. Situations differ from each other in only one feature, this will allow us to assess the role of this feature in making a decision to open an entrepreneurial business. It is important to note that the simplest formulations were used in the situations and questions of the questionnaire, as it is passed by laymen in the field of economics and taxation. The second part of the questionnaire allows you to analyze the entrepreneurial bricolage.

In the first situation, the respondent is asked to dive into the following situation: imagine that you are an individual who, while working for hire, has deposited an amount of 3 million rubles to a bank account. You live in Moscow. You don't have your own place (you rent an apartment). You live in a country under sanctions restrictions (correspond to the current economic conditions). Consistently, in 2-4 situations, the following signs changed in turn: the presence of their own housing (since this factor can significantly affect the direction of investing their own funds by individuals) and economic conditions (the presence or absence of sanctions).

It should also be noted that the initial investment amount – 3 million rubles – was also not chosen by chance. According to a study conducted in 2021 by Tinkoff Bank ^[5], 3 million rubles is the most expensive way to buy a ready-made small business (in the field of car repair). Other ways of investing (creating an independent business "from scratch" without employees and with hired labor) in other industries will require significantly less financial resources. On the other hand, according to official information provided by Sberbank of Russia, the average mortgage payment for an apartment in the same period amounted to 1.9 million rubles. ^[6]. Thus, for those who are inclined to entrepreneurship, even in the absence of their own housing, it will be possible to direct part of the funds (from the proposed 3 million rubles) to their own business.

 According to the results of each of the four situations, respondents must answer two questions sequentially:

1. Are you ready to open your own business in the current situation (type of activity – any one you choose):

A) yes

B) no

C) I don't know

2. How much of the deferred 3 million rubles are you ready to invest in your business (specify the amount in rubles from 0 to 3000000)?

The third part of the laboratory experiment is devoted to identifying the role of tax factors in the development of entrepreneurship. We deliberately placed it in the second half of the experiment, since the respondents at this moment find themselves as immersed as possible in experimental conditions. The questionnaire of the third part included general questions about tax administration, registration and registration as an entrepreneur, tax benefits for small and medium-sized businesses, as well as some other incentive tools.  As a basis, a tool developed by American economists, representatives of Cleveland State University Spicer M. W. And Becker L. A. ^[7], and called the "tax resistance scale" is used. The data for the third part of our study were collected using questionnaires applied to primary sources. The questionnaire, consisting of twenty-one (21) statements, was developed to assess the attitude of taxpayers to taxes. To indicate agreement in principle or disagreement with the proposed statements, a five-point Likert scale was proposed (from 1 with complete disagreement to 5 with complete agreement):

5 points - I completely agree,

4 points - I agree,

3 points - I find it difficult to answer,

2 points - disagree,

1 point - I completely disagree.

The questionnaire consisted of three types of questions (Figure 1).

Source: compiled and finalized by the author on the basis of ^[8].

Figure 1 – Structure of the third part of the questionnaire of the laboratory experiment

The structure of the questionnaire is based on the works of A.P. Vyatkin and has been finalized taking into account a number of author's assumptions in the behavioral motives of taxpayers. The questions of different blocks are mixed together, which is aimed at increasing the veracity of the answers of the subjects to the questions. The presence of such a questionnaire allows you to get an idea of the level of the respondent's tax culture, which is valuable when summarizing the results of the experiment ^[9]. In addition, a number of questions do not contain a direct reference to taxes, but allows you to assess the effectiveness of tax regulation of small and medium-sized businesses. For example, question 21 of the third part of the questionnaire, "I think it is more difficult for an individual entrepreneur to find large partners," allows us to assess the role of VAT exemption in the interaction of entrepreneurs with large businesses.

The last group of questions is presented in the third part of the questionnaire in order to relieve the emotional tension of the participants. It does not involve evaluating "good" or "bad" behavior. For this reason, we have replaced the questions of A.P. Kireenko of the third block with similar ones that are neutral in essence and content, but allow us to identify a number of behavioral motives of taxpayers.

After evaluating all the previous survey elements, participants were asked to fill out a short questionnaire with information about them (the fourth part of the experiment).

It is necessary to give some explanations on the structural content of the questionnaire. Firstly, in order to assess the role of tax regulators in stimulating entrepreneurship, a preliminary assessment of the presence of entrepreneurial initiatives among respondents is mandatory in principle. In this connection, the first two parts of the questionnaire are aimed at identifying an entrepreneurial initiative as such, and the third – at assessing the role of tax instruments. At the same time, 16 of the 21 questions in the third part of the questionnaire are directly related to taxes, 2 (9 and 13) allow determining the place of taxes among other instruments, 1 (15) determines institutional trust in the state and 2 (2 and 17) reveal the respondents' attitude to registering themselves as a business entity.

Results

The laboratory experiment was carried out from April 18, 2022 to July 25, 2022. The survey has already been attended by students, as well as former graduates of the Financial University, RGAU-MSHA named after K.A. Timiryazev in Moscow, students of the regions of Russia (Yaroslavl, Vladivostok, Krasnodar). In total - 234 students of 3-4 courses and 34 graduates. 109 individual entrepreneurs and self-employed took part in the experiment. To collect information from the last group, the questionnaire was posted on social networks, on the pages of regional associations of young entrepreneurs of students and graduates, as well as at the entrepreneurial business forum.

It is important to note that students of economic (Taxes and taxation, Customs regulation and tax Control, State and Municipal Finance, etc.) and non-economic specialties (Applied Informatics in Economics, Information Systems and Technologies in business Analytics, Agronomy) participated in the experiment. The sample considered is representative of the university's specialties, but not representative at the regional level. This research is a step in creating a database with all Russian university students and their motivation to become entrepreneurs or follow their career in time. The author of the study considered the analysis of students of economic and non-economic profile for their potential in the development of their own business to be a good starting point. The sample structure is presented in more detail in Table 1.

Table 1 – Structure of respondents participating in the laboratory experiment

Source: compiled by the author himself.

The laboratory experiment contained in the study aims to determine the role of tax instruments in stimulating entrepreneurial activity (rather than supporting an existing entrepreneurial business). In this regard, the main respondents are the student audience, not entrepreneurs. The validity of the application of the student environment is also presented in more detail in the R&D Report "Application of the methodology of tax experiments in the educational process to determine the optimal level of tax burden on individuals" ^[3]. Entrepreneurs and the self-employed were added to the category of respondents only in order to compare the opinion of potential entrepreneurs with the current ones, and to assess expectations from tax incentives with their real assessment of the current ones. Thus, the low proportion of entrepreneurs surveyed does not affect the results of the experiment.

A detailed analysis of the composition and structure of the sample in various categories allowed us to assess the "truthfulness" of a number of control questions. For example, to correlate the respondent's age, work experience and his status (student, graduate or entrepreneur / self-employed). In general, the analysis showed that the respondents' answers are truthful, and therefore can be subjected to quantitative and qualitative processing. With further data processing by intellectual analysis tools, the main calculations will be carried out on a training sample of current students (234 people), and then additionally checked according to the data of the two remaining samples. It is important to note that the division of respondents according to the profile of education and work experience is thorough (according to the number of respondents), which later will allow us to assess the impact of these factors on the presence of entrepreneurial initiative.

The characteristics of the general desire for entrepreneurship are presented in Table 2.

Table 2 – Structure of students and graduates by common desire for entrepreneurship

Source: compiled by the author himself.

As the data in Table 2 show, in general, most of the respondents have a desire to engage in entrepreneurial business, regardless of the presence or absence of sanctions. At the same time, the latter have a different impact on the behavior of current students and graduates: the former are more willing to do their business under sanctions than in their absence, while the latter lose such an aspiration. Having your own business often, especially in the first years of its existence, leads to irregular working hours, so it was important to assess the respondents' readiness for this. The experiment showed that graduates are more ready for an irregular schedule, while current students, if they have a desire for entrepreneurship, do not always want to work in such a rhythm (only 118 people out of 184).

Due to the fact that the main purpose of the experiment was to determine the priority mechanisms of tax regulation of individual entrepreneurs, it is necessary to initially determine the place and significance of these mechanisms in the system of state regulation. To do this, respondents were asked to assess the importance of state support tools for the development of entrepreneurial initiative. The results of such a survey are shown in table 3.

Table 3 – Results of evaluation of instruments of state support of entrepreneurial initiative (1 – the most significant, 4 – the most insignificant)

Source: compiled by the author himself.

If we evaluate the aggregate assessment of the proposed tools for supporting entrepreneurs, the respondents arranged them as follows (in order of decreasing importance): tax benefits, available loans, the cost of renting property, receiving budget money (subsidies, grants and other forms). At the same time, unanimity was achieved only with regard to available loans, to which all three categories of respondents gave the 2nd place in importance. At the same time, current students and entrepreneurs put tax benefits in the first place, and graduates gave greater preference to the preferential cost of renting property. There were no discrepancies in the positions of other support tools.

For the subsequent assessment of tax factors affecting the entrepreneurial initiative, the respondents were divided into three categories:

1) entrepreneurs are participants who, in the given situations, were ready to invest all 3 million rubles in their business.;

2) non–entrepreneurs are participants who were not ready to invest any available funds in their business within the framework of the proposed situations;

3) undecided entrepreneurs – respondents who, depending on different conditions, were ready to invest different amounts of financial resources in their own business.

In more detail, this distribution by current students is presented in Table 4.

Table 4 – Distribution of entrepreneurs and non-entrepreneurs depending on the given situations by current students

Source: compiled by the author himself.

First of all, we note that the number of undecided current students is significant in all 4 situations (varies from 156 to 188 people or from 67 to 80%, respectively). At the same time, economic sanctions and the general economic situation in the country affect the entrepreneurial initiative to varying degrees, depending on the availability of housing for an individual or his absence. So, if you have your own housing, 17 more people agreed to invest in your business in a favorable economic situation than in its absence. The improvement of housing conditions under the current sanctions general economic conditions influenced the positive desire to invest in 36 respondents, while 44 people had a favorable economic situation. 86 people agreed to invest in entrepreneurship additionally when two factors change (improving housing conditions and the economic situation in the country).

A similar distribution was implemented for graduates, its results are presented in Table 5.

Table 5 – Distribution of entrepreneurs and non-entrepreneurs depending on the given situations by graduates

Source: compiled by the author himself.

First of all, we note that the number of undecided graduates is significant in all 4 situations, on average it was 20 people out of 34. Other trends and conclusions supported by the data in Table 4.4 are also confirmed by the results of the graduate survey.

To select specific mechanisms for stimulating entrepreneurial activity using a pair correlation (between the responses to the desire to open a business and the estimates of the statements of the third part of the questionnaire), the statements with the highest coefficients (at least 0.1 – on the Cheddock scale) were identified. The results are presented in table 6.

Table 6 – Correlation evaluation of the parameters of the third part of the questionnaire

Source: compiled by the author himself. 

The correlation matrix was built according to the assessment of the Likert scale of the third part of the questionnaire (where 5 is the most positive assessment, and 1 is the most negative) and answers about the readiness to open a business (1 – yes, 2 – no, 3 – I find it difficult to answer). Thus, the negative sign of correlation indicates the presence of a direct link between the willingness to entrepreneurship and the positive assessment of tax regulators. For the expediency of further use of the results of the experiment at sufficiently low values of the correlation coefficient in Table 6 (the presence of weak and moderate tightness of the connection), the results of the experiment are compared with the educational profiles of students (the coefficients are calculated separately for two groups – economists and non-economists). As a result, the correlation coefficients increased. It was revealed that students of economic training profiles, who generally evaluate tax instruments positively and show greater awareness of the business environment, nevertheless showed great caution when investing their own funds in business (as part of the experimental part of the survey). Students of non-economic profiles highly appreciated the same tools while increasing the volume of investments in business. In addition, non-economists appreciated the role of preferential lending and the possibility of surety of tax authorities on loans, stability of tax legislation, reduction of tax audits, explanatory policy of the Federal Tax Service of Russia, as well as the help of surrounding relatives and friends on tax advice (all at the level of moderate closeness of communication).

Conclusions

The experiment showed that the tools allocated by respondents (during sanctions and without them, taking into account the results of analysis within educational profiles) to stimulate entrepreneurial initiative are:

- tax holidays (exemption from a number of taxes for three years);

- state protection against fraud and bribery.

Graduates also referred to the support tools that influence entrepreneurial decisions:

- informing about the current tax conditions;

- number of small business tax audits;

- refusal of personal income tax deductions with the convenience of special tax regimes;

- tax consulting (according to graduates' estimates, this is the most significant factor, but its role is much more highly appreciated in the sanctions conditions. This indirectly confirms the complexity of the procedures for obtaining tax preferences, as well as the need for further development of the institute of tax consulting);

- the possibility of surety of tax authorities on loans.

During the experiment, a number of other significant conclusions were obtained. Firstly, respondents have high hopes for credit sources of financing mainly in the absence of sanctions and the economic crisis. Secondly, they are afraid of the short-term nature of a number of tax benefits introduced in pandemic and sanctions restrictions. It turns out, on the one hand, such incentives support existing business structures, on the other, cause distrust among those individuals who are just planning to engage in entrepreneurship.

It is important to note that the responses of current entrepreneurs and the self-employed corresponded to the responses of students (correlation coefficient 0.8) and graduates (correlation coefficient 0.87), which allows us to note the importance of the above tools and determine further vectors of development of tools for tax incentives of individual entrepreneurial initiative. In addition, the high degree of correspondence between the results of the survey of students and entrepreneurs justifies the objectivity of the results of laboratory experiments based on the student community, which has been repeatedly questioned, especially in the studies of foreign scientists ^[10-14].