Behavioral Responses to Local Tax Rates: Quasi-Experimental Evidence from a Foreigners' Tax Scheme in Switzerland

Kurt Schmidheiny and Michaela Slotwinski

No 10833, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study behavioral responses to local income taxes exploiting a special tax regime which applies to foreign employees residing in Switzerland. The used institutional setting generates two thresholds through which locally heterogeneous taxation is assigned: An income threshold at 120,000 Swiss francs and a duration threshold at 5 years of stay in Switzerland. We exploit these thresholds by applying a discontinuity in density design and a fuzzy RDD to administrative income data. We find causal evidence for strategic income bunching for wage earners and tax induced intra-national mobility. Several pieces of evidence suggest that individuals have to "learn the tax code" and that knowledge and information transmission through local networks plays a major role in the behavioral response to tax incentives.

Keywords: Income bunching; Income taxes; Regression discontinuity design; Tax induced mobility (search for similar items in EconPapers)
JEL-codes: H24 H31 J61 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-eur, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Behavioral Responses to Local Tax Rates: Quasi-Experimental Evidence from a Foreigners' Tax Scheme in Switzerland (2015)
Working Paper: Behavioral Responses to Local Tax Rates: Quasi-Experimental Evidence from a Foreigners Tax Scheme in Switzerland (2014)
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