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How do taxpayers respond to tax subsidy for long-term savings? Evidence from Thailand’s tax return data

Athiphat Muthitacharoen () and Trongwut Burong
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Athiphat Muthitacharoen: Chulalongkorn University
Trongwut Burong: Revenue Department

International Tax and Public Finance, 2022, vol. 29, issue 3, No 7, 726-750

Abstract: Abstract This paper uses a panel of personal income tax return data for the population of Thai tax filers to examine how individuals respond to tax subsidy for long-term savings. We utilize the 2013 tax reform that lowered the price subsidy for long-term savings in order to obtain causal identification. Our difference-in-difference analysis illustrates that there is a considerable heterogeneity in the individual responses to the subsidy cut—with middle-income taxpayers responding much more than their high-income counterparts. Among the middle-income group, we also find that the subsidy reduction has larger effects on decisions of smaller contributors. Our findings shed light on the heterogeneity of individual responses which are crucial for policymakers who consider an incremental change in the existing tax incentive scheme.

Keywords: Personal income tax; Tax subsidy; Long-term savings; Retirement savings; Developing countries (search for similar items in EconPapers)
JEL-codes: H24 H31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10797-021-09687-w

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