Tax Bunching, Income Shifting and Self-employment
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Tax Bunching, Income Shifting and Self-employment. / le Maire, Christian Daniel; Schjerning, Bertel.
In: Journal of Public Economics, Vol. 107, 2013, p. 1-18.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Tax Bunching, Income Shifting and Self-employment
AU - le Maire, Christian Daniel
AU - Schjerning, Bertel
PY - 2013
Y1 - 2013
N2 - This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the Danish self-employed. If income shifting was neglected in this case, we would estimate a taxable income elasticity in the range of 0.43-0.53 and conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the bunching in taxable income is driven by intertemporal income shifting, implying a structural elasticity of 0.14-0.20.
AB - This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the Danish self-employed. If income shifting was neglected in this case, we would estimate a taxable income elasticity in the range of 0.43-0.53 and conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the bunching in taxable income is driven by intertemporal income shifting, implying a structural elasticity of 0.14-0.20.
KW - Faculty of Social Sciences
KW - Self-employment
KW - Tax bunching
KW - Retained profits
KW - Income shifting
KW - Tax avoidance
U2 - 10.1016/j.jpubeco.2013.08.002
DO - 10.1016/j.jpubeco.2013.08.002
M3 - Journal article
VL - 107
SP - 1
EP - 18
JO - Journal of Public Economics
JF - Journal of Public Economics
SN - 0047-2727
ER -
ID: 49148436