Refine
Document Type
- Working Paper (17)
- Article (1)
Language
- English (18)
Is part of the Bibliography
- no (18)
Keywords
- Steuerhinterziehung (4)
- Tax avoidance (4)
- Corporate taxation (3)
- Einkommensteuer (3)
- Income tax (3)
- Körperschaftssteuer (3)
- Privatunternehmen (3)
- Steuervermeidung (3)
- Tax evasion (3)
- Dividend taxation (2)
Institute
This paper studies the cross-base tax elasticity of capital gains realizations to labor income taxes when capital gains are taxed at a separate proportional tax rate. Using a longitudinal panel of over 265,000 individuals in Sweden, this paper shows in a regression kink design that labor income taxes affect capital gains at the extensive and intensive margins. An increase in the marginal labor income tax rate increases the likelihood of realizing capital gains and the amount of realized capital gains. One implication of this result is that the excess burden of labor income taxation is affected by cross-base tax elasticities.
whether the moral evaluation of tax evasion is subject to a self-serving bias. We find that tax morale is egoistically biased: Subjects with the opportunity to evade taxes judge tax evasion as less unethical as opposed to those who cannot evade. The detection probability does not affect this result. Further, we do not find moral spillover effects, for example, on legal activities.
This paper tests the effect of dividend taxation on employment. Since dividend taxation affects real investments, tax-induced changes in real investments should map into employment effects. Using a difference-in-difference approach around the Swedish 2006 dividend tax cut and unique corporate-level data with income tax information on every employee, we find robust evidence of dividend tax-induced employment effects. In response to the dividend cut, both employment and wage levels increase in cash-constrained firms relative to cash-rich closely held corporations.
Does legality matter?
(2015)
Previous research argues that law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals’ decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects’ decisions by defining the borderline between legality and illegality. However, once we introduce potential negative financial consequences, legality does not affect tax minimization. Only if we use moral priming to increase subjects’ moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of law. Legality appears to be an important determinant of behavior only if we consider activities with no or low risk of negative financial consequences or if subjects are morally primed.
Empirical evidence suggests that there is substantial cross-firm variation in the extent of tax avoidance. However, this variation is not well understood. This paper provides a theoretical background for testing, and thus explaining, cross-firm differences in tax avoidance. We develop a formal model with two agents to analyze the incentives that lead firms to engage in tax avoidance. The tax avoidance decision is a function of moral hazard, tax-planning costs, and the potential to increase earnings. If the potential to increase earnings is low, the tax-planning decision is determined by moral-hazard problems. In contrast, when this potential is high, the tax-planning decision is mainly driven by taxplanning costs, such as reputational and political costs. One implication of our model is that moral hazard can (partly) explain why some firms do not engage in tax avoidance: Severe problems of moral hazard make tax avoidance less likely. Our model can be applied to test dierences in tax avoidance between different types of firms.
Tax loss carrybacks
(2016)
Tax regimes treat losses and profits asymmetrically when profits are immediately taxed but losses are not immediately refunded. We find that treating losses less asymmetrically by granting refunds less restrictively increases loss firms' investment: A third of the refund is invested and the rest is held as cash or returned to shareholders. However, the investment response is driven primarily by firms prone to engage in risky overinvestment. Consistent with the risk of misallocation, we find a delayed exit of low-productivity loss firms receiving less restrictive refunds, indicating potential distortion of the competitive selection of firms. This distortion also negatively affects aggregate output and productivity. Our results suggest that stimulating loss firms' investment with refunds unconditional on their future prospects comes at the risk of misallocation.
This study examines the relation between executives’ inside debt holdings and corporate tax risk. As executives’ inside debt holdings are unsecured and unfunded, they should align executives’ interests with those of outside debtholders and incentivize executives to act more conservatively toward risk. Hence, inside debt should also reduce the risk of tax avoidance activities. Consistent with this prediction, we find that executive inside debt holdings are negatively related to tax risk. Further, this relation becomes stronger at higher levels of tax risk. We also find that the relation between insider debt and tax risk is stronger for firms that are not facing liquidity constraints and among well-governed firms. The latter result implies that institutional ownership and inside debt compensation are substitutes in reducing tax risk. Overall, our results suggest that part of the observed cross-sectional difference in tax avoidance can be explained by a reduction in tax risk that is related to executive inside debt holdings.
This paper examines the sensitivity of profit shifting to the corporate tax rate difference between a subsidiary and its parent company. We exploit tax rate variation stemming from European tax reforms over the period 2003-2013 while accounting for tax base adjustments that might affect firms’ profit shifting response to tax rate changes. We find that affiliates’ profits are sensitive to tax rate changes. However, tax base broadening reforms mitigate the tax rate incentives for profit shifting and significantly reduce the semi-elasticity of profits with respect to corporate tax rates. Finally, we provide evidence of a downward trend in the tax sensitivity of profit shifting, suggesting that the spread of anti-avoidance regulation may have successfully constrained profit-shifting strategies.