Heterogeneity and Persistence in Tax Responsiveness: Evidence from Owner-Managed Companies

Gabriella Massenz

No 1503, Working Paper Series from Research Institute of Industrial Economics

Abstract: We study responsiveness of owner-managed companies to a corporate income tax kink using Dutch tax records linking firms to their owners. The corporate taxable income elasticity (CETI) is 0.08, but tax sensitivity is over three times higher for firms using specific investment deductions. These are generous, allow for large depreciation and include assets that can reflect owner-managers’ consumption. The CETI rises with deductions’ use and is higher for large firms in industries with easy access to them. We document persistence at the kink, which is driven by large firms using deductions and whose owner-managers repeatedly target personal income tax kinks.

Keywords: Taxable income elasticity; Owner-managed companies; Tax deductions; Bunching (search for similar items in EconPapers)
JEL-codes: H24 H25 H26 H30 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2024-10-07
New Economics Papers: this item is included in nep-lma, nep-pbe and nep-pub
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