Business owners and income-shifting: evidence from Finland

Jarkko Harju and Tuomas Matikka

Small Business Economics, 2016, vol. 46, issue 1, 115-136

Abstract: This study examines income-shifting between tax bases among the owners of privately held businesses. The dual income tax system in Finland offers noticeable incentives for income-shifting between wages and dividends for business owners. The dividend tax reform of 2005 enables us to study how this particular form of tax avoidance reacts to an exogenous change in tax rates. Our results support highly active income-shifting behavior. We find that the income-shifting effect is homogeneous across different owners and firms. However, we find that the size of the tax incentive affects the size of the response, suggesting that costs related to income-shifting are important. Copyright Springer Science+Business Media New York 2016

Keywords: Business owners; Income-shifting; Income taxation; Dividend tax reform; G35; H24; H25; L26 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:46:y:2016:i:1:p:115-136

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DOI: 10.1007/s11187-015-9679-4

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