Social networks and tax avoidance: evidence from a well-defined Norwegian tax shelter

Annette Alstadsæter, Wojciech Kopczuk and Kjetil Telle

International Tax and Public Finance, 2019, vol. 26, issue 6, No 4, 1328 pages

Abstract: Abstract In 2005, over 8% of Norwegian shareholders transferred their shares to new (legal) tax shelters intended to defer taxation of capital gains and dividends that would otherwise be taxable in the aftermath of a reform implemented in 2006. Using detailed administrative data, we identify family networks and describe how take-up of tax avoidance progresses within a network. A feature of the reform was that the eligibility to set up a tax shelter changed discontinuously with individual shareholding of a firm and we use this fact to estimate the causal effect of availability of tax avoidance for a taxpayer on tax avoidance by others in the network. We find that eligibility in a social network increases the likelihood that others will take-up. This suggests that taxpayers affect each other’s decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of optimization frictions in the context of behavioral responses to taxation.

Keywords: Tax avoidance; Social interactions; Family networks; Dividend tax reform; Administrative micro data; Tax shelters; Holding corporations (search for similar items in EconPapers)
JEL-codes: D83 H26 H31 H32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Working Paper: Social networks and tax avoidance: Evidence from a well-defined Norwegian tax shelter (2018)
Working Paper: Social Networks and Tax Avoidance: Evidence from a Well-Defined Norwegian Tax Shelter (2018)
Working Paper: Social networks and tax avoidance. Evidence from a well-defined Norwegian tax shelter (2018)
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DOI: 10.1007/s10797-019-09568-3

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