How do small firms respond to tax schedule discontinuities? Evidence from South African tax registers

Wian Boonzaaier (), Jarkko Harju, Tuomas Matikka and Jukka Pirttilä
Additional contact information
Wian Boonzaaier: South African Reserve Bank and National Treasury

International Tax and Public Finance, 2019, vol. 26, issue 5, No 6, 1104-1136

Abstract: Abstract We study the responsiveness of small- and medium-sized firms to a small-business corporate income tax schedule using population-wide administrative data from South Africa. We find sizeable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp and reacts immediately to changes in the location of the kink points. These observations suggest that a sizeable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked to underreporting of sales and legal tax-planning activities.

Keywords: Corporate taxation; Small firms; Emerging economies; Bunching (search for similar items in EconPapers)
JEL-codes: H21 H25 H32 O12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1007/s10797-019-09550-z Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: How do Small Firms Respond to Tax Schedule Discontinuities? Evidence from South African Tax Registers (2018)
Working Paper: How do small firms respond to tax schedule discontinuities? Evidence from South African tax registers (2017)
Working Paper: How do small firms respond to tax schedule discontinuities?: Evidence from South African tax registers (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:26:y:2019:i:5:d:10.1007_s10797-019-09550-z

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-019-09550-z

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().