Intertemporal income shifting and the taxation of business owner-managers

Helen Miller (), Thomas Pope () and Kate Smith
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Helen Miller: Institute for Fiscal Studies and Institute for Fiscal Studies
Thomas Pope: Institute for Fiscal Studies and Institute for Fiscal Studies

No W21/49, IFS Working Papers from Institute for Fiscal Studies

Abstract: We use newly linked tax records to show that the large responses of UK company owner-managers to personal taxes are due to intertemporal income shifting and not to reductions in real business activity. Around half of this shifting is short-term and helps prevent volatile incomes being taxed more heavily under progressive personal taxes. The remainder re?ects systemic pro?t retention over long periods to take advantage of lower tax rates, including preferential treatment of capital gains. We ?nd no evidence that this tax-induced retention increases business investment. It does, however, substantially reduce the tax revenue raised from high income business owners.

Date: 2021-12-13
New Economics Papers: this item is included in nep-cwa, nep-eur, nep-his, nep-pbe and nep-pub
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Intertemporal Income Shifting and the Taxation of Business Owner-Managers (2024)
Working Paper: Intertemporal income shifting and the taxation of business owner-managers (2024)
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