New research: Stock options promote entrepreneurship

The interaction of favorable tax treatment and inherent advantages has led to near universal use of stock options in American venture capital deals, while this remains less common in Europe. Magnus Henrekson, IFN, and Tino Sanandaji asked the tax consultancy firm PwC to calculate the effective tax rate for a standardized entrepreneurial case in 22 countries, finding that countries with favorable tax treatment have more VC activity. One advantage of this tax policy is that it narrowly targets entrepreneurial startups without requiring broad tax cuts.