Business owners and income-shifting: evidence from Finland

Jarkko Harju; Tuomas Matikka

doi:10.1007/s11187-015-9679-4

Business owners and income-shifting: evidence from Finland

Jarkko Harju^*
, Tuomas Matikka

^*Tämän työn vastaava kirjoittaja

Tutkimustuotos: Artikkeli › Tieteellinen › vertaisarvioitu

6 Sitaatiot (Scopus)

Abstrakti

This study examines income-shifting between tax bases among the owners of privately held businesses. The dual income tax system in Finland offers noticeable incentives for income-shifting between wages and dividends for business owners. The dividend tax reform of 2005 enables us to study how this particular form of tax avoidance reacts to an exogenous change in tax rates. Our results support highly active income-shifting behavior. We find that the income-shifting effect is homogeneous across different owners and firms. However, we find that the size of the tax incentive affects the size of the response, suggesting that costs related to income-shifting are important.

Alkuperäiskieli	Englanti
Sivut	115-136
Sivumäärä	22
Julkaisu	Small Business Economics
Vuosikerta	46
Numero	1
DOI - pysyväislinkit	https://doi.org/10.1007/s11187-015-9679-4
Tila	Julkaistu - 1 tammik. 2016
Julkaistu ulkoisesti	Kyllä
OKM-julkaisutyyppi	A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä

Rahoitus

Many thanks to Richard Blundell, Essi Eerola, Ari Hyytinen, Laurence Jacquet, Seppo Kari, Olli Kärkkäinen, Tuomas Kosonen, Jukka Pirttilä, Panu Poutvaara, Håkan Selin and Joel Slemrod for their very useful comments and discussion. We also thank the assigned discussants and participants in many conferences and seminars for their helpful comments. All remaining errors are our own. The authors gratefully acknowledge funding from the Nordic Tax Research Council and the Yrjö Jahnsson Foundation. Harju gratefully thanks the Alfred Kordelin Foundation, and Matikka thanks the Finnish Cultural Foundation, OP-Pohjola Group Research Foundation, the Emil Aaltonen Foundation and the Finnish Doctoral Programme in Economics for their financial support.

!!ASJC Scopus subject areas

Yleinen liiketoiminta, johto ja kirjanpito
Economics and Econometrics

Pääsy asiakirjaan

10.1007/s11187-015-9679-4

Siteeraa tätä

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title = "Business owners and income-shifting: evidence from Finland",

abstract = "This study examines income-shifting between tax bases among the owners of privately held businesses. The dual income tax system in Finland offers noticeable incentives for income-shifting between wages and dividends for business owners. The dividend tax reform of 2005 enables us to study how this particular form of tax avoidance reacts to an exogenous change in tax rates. Our results support highly active income-shifting behavior. We find that the income-shifting effect is homogeneous across different owners and firms. However, we find that the size of the tax incentive affects the size of the response, suggesting that costs related to income-shifting are important.",

keywords = "Business owners, Dividend tax reform, Income taxation, Income-shifting",

author = "Jarkko Harju and Tuomas Matikka",

note = "Funding Information: Many thanks to Richard Blundell, Essi Eerola, Ari Hyytinen, Laurence Jacquet, Seppo Kari, Olli K{\"a}rkk{\"a}inen, Tuomas Kosonen, Jukka Pirttil{\"a}, Panu Poutvaara, H{\aa}kan Selin and Joel Slemrod for their very useful comments and discussion. We also thank the assigned discussants and participants in many conferences and seminars for their helpful comments. All remaining errors are our own. The authors gratefully acknowledge funding from the Nordic Tax Research Council and the Yrj{\"o} Jahnsson Foundation. Harju gratefully thanks the Alfred Kordelin Foundation, and Matikka thanks the Finnish Cultural Foundation, OP-Pohjola Group Research Foundation, the Emil Aaltonen Foundation and the Finnish Doctoral Programme in Economics for their financial support. Publisher Copyright: {\textcopyright} 2015, Springer Science+Business Media New York.",

year = "2016",

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doi = "10.1007/s11187-015-9679-4",

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TY - JOUR

T1 - Business owners and income-shifting

T2 - evidence from Finland

AU - Harju, Jarkko

AU - Matikka, Tuomas

N1 - Funding Information: Many thanks to Richard Blundell, Essi Eerola, Ari Hyytinen, Laurence Jacquet, Seppo Kari, Olli Kärkkäinen, Tuomas Kosonen, Jukka Pirttilä, Panu Poutvaara, Håkan Selin and Joel Slemrod for their very useful comments and discussion. We also thank the assigned discussants and participants in many conferences and seminars for their helpful comments. All remaining errors are our own. The authors gratefully acknowledge funding from the Nordic Tax Research Council and the Yrjö Jahnsson Foundation. Harju gratefully thanks the Alfred Kordelin Foundation, and Matikka thanks the Finnish Cultural Foundation, OP-Pohjola Group Research Foundation, the Emil Aaltonen Foundation and the Finnish Doctoral Programme in Economics for their financial support. Publisher Copyright: © 2015, Springer Science+Business Media New York.

PY - 2016/1/1

Y1 - 2016/1/1

N2 - This study examines income-shifting between tax bases among the owners of privately held businesses. The dual income tax system in Finland offers noticeable incentives for income-shifting between wages and dividends for business owners. The dividend tax reform of 2005 enables us to study how this particular form of tax avoidance reacts to an exogenous change in tax rates. Our results support highly active income-shifting behavior. We find that the income-shifting effect is homogeneous across different owners and firms. However, we find that the size of the tax incentive affects the size of the response, suggesting that costs related to income-shifting are important.

AB - This study examines income-shifting between tax bases among the owners of privately held businesses. The dual income tax system in Finland offers noticeable incentives for income-shifting between wages and dividends for business owners. The dividend tax reform of 2005 enables us to study how this particular form of tax avoidance reacts to an exogenous change in tax rates. Our results support highly active income-shifting behavior. We find that the income-shifting effect is homogeneous across different owners and firms. However, we find that the size of the tax incentive affects the size of the response, suggesting that costs related to income-shifting are important.

KW - Business owners

KW - Dividend tax reform

KW - Income taxation

KW - Income-shifting

U2 - 10.1007/s11187-015-9679-4

DO - 10.1007/s11187-015-9679-4

M3 - Article

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JO - Small Business Economics

JF - Small Business Economics

IS - 1

ER -

Business owners and income-shifting: evidence from Finland

Abstrakti

Rahoitus

!!ASJC Scopus subject areas

Pääsy asiakirjaan

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