Abstract
Research background: Even if they have a similar background, the ex-communist countries in Europe have started since the ‘90s to differentiate socially and economically one from another. Nowadays, the differences between them are significant in many aspects of the socio-economic environment, including innovation. Measurements done by Cornell University, INSEAD, and WIPO through the Global Innovation Index and some researchers compared the achievements from the last 30 years of the ex-communist countries in terms of innovation. Although innovation may be under the influence of multiple factors, some authors suggest that taxation has a major role. Purpose of the article: The purpose of the article is identifying a potential link between the dynamics of innovation and the dynamics of taxation in 8 ex-communist EU countries in the context of globalization, and to describe the way the globalization and taxation together fostered or suppressed the innovation. Methods: We will do a comparative analysis, comparing the taxation and the innovation input and output indicators - regulatory environment, education, general infrastructure, credit, investment, knowledge workers, knowledge creation, knowledge impact, online creativity, intangible assets. Findings & Value added: This paper may add value to the economic and taxation policies in the ex-communist countries by identifying the policies that proved their effectiveness in increasing innovation rates, policies that can be adapted and then adopted by the ex-communist countries that are less innovative.
Highlights
Taxation influences directly or indirectly every aspect of production and distribution (James, 2001), including the development of new products and production techniques and technologies (Bodislav et al, 2020).There is a strong body of evidence showing that physical accumulation of capital and labor supply, as key factors in economic development (Piketty et al, 2019), are important channels through which taxation policy impacts the economy and influences its growth (Bodislav et al, 2020)
The highest is the Global Innovation Index Score, the lowest is the share of consumption taxes in total tax revenues
In this article we aimed to identify a potential link between the dynamics of innovation and the dynamics of taxation in 8 ex-communist EU countries in the context of globalization, and to describe the way the globalization and taxation together fostered or suppressed the innovation
Summary
There is a strong body of evidence showing that physical accumulation of capital and labor supply, as key factors in economic development (Piketty et al, 2019), are important channels through which taxation policy impacts the economy and influences its growth (Bodislav et al, 2020). Tax rates on capital gains, dividends, labor income and corporate income have significant effects on innovative investments and thereby on aggregate labor productivity and TFP growth (Ferraro et al, 2020). Kates and Milionis (2019) showed that only countries with an innovation-based growth model benefit from a corporate tax rate reduction, by allowing companies that are already innovation orientated to accumulate more capital and innovate even more (Ohrn, 2018).
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