Taxation and self-employment

Zsofia Barany (baranyzs@ceu.edu)

No 723, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: In this paper I theoretically show that if the self-employed evade income taxes, then the choice of being self-employed is more sensitive to the tax rates on wages than to tax rates on income from self-employment. Using variation in the statutory tax rates across countries, industries, and occupations, I find evidence that supports the predictions of the model. This suggests that those who choose self-employment, partly do so to take advantage of the technology it offers in evading taxes. This extensive margin of adjustment – between employment and self-employment – should be taken into account when considering the effects of tax rates on labor income, on taxable income and on welfare.

Pages: 30 pages
Date: 2017-11
New Economics Papers: this item is included in nep-ent, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in SciencesPo Department of Economics, Discussion Paper no. 2018-02. https://sciencespo.hal.science/hal-03393144

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http://www.lisdatacenter.org/wps/liswps/723.pdf (application/pdf)

Related works:
Working Paper: Taxation and Self-Employment (2018)
Working Paper: Taxation and Self-Employment (2018)
Working Paper: Taxation and Self-Employment (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:lis:liswps:723

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