EconPapers    
Economics at your fingertips  
 

Tax evasion, capital gains taxes, and the housing market

Sumit Agarwal, Keyang Li, Yu Qin (), Jing Wu and Jubo Yan

Journal of Public Economics, 2020, vol. 188, issue C

Abstract: In this study, we exploit a policy shock that differentially increased capital gains taxes for housing units with holding period less than 5 years, and document tax avoidance and tax evasion in the residential resale market in China. We show suggestive evidence that after the capital gains tax increase, resale transactions exhibit more bunching above 5 years of holding period, but the responses are small and imprecisely estimated. More importantly, using precise information of both the actual transaction price and the reported price to the tax authority, we find that tax evasion, measured by the difference between the two prices, becomes 23.3% higher. We also document that the policy has strong heterogeneous effects, whereby cash buyers are 8.4% more likely to buy a house than buyers who need financing after the policy. This is mainly because financing buyers prefer a higher reported price (and so less tax evasion) to secure higher bank loans but cash buyers do not have such concern.

Keywords: Tax evasion; Tax avoidance; Capital gains tax; Housing market; Housing policy (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272720300864
Full text for ScienceDirect subscribers only

Related works:
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:eee:pubeco:v:188:y:2020:i:c:s0047272720300864

DOI: 10.1016/j.jpubeco.2020.104222

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-03-28
Handle: RePEc:eee:pubeco:v:188:y:2020:i:c:s0047272720300864