Do People Smooth their After-Tax Income? Evidence from Japanese Local Tax

Yasue Hakata

Bulletin of Applied Economics, 2022, vol. 9, issue 2, 147-158

Abstract: This study provides evidence that under the Japanese local individual income tax system, individuals smooth their after-tax income by choosing the timing of their tax payments. We construct a monthly data set of Japanese local taxes with sample periods for over 26 years. The results show that though the tax amounts are pre-determined in one-year units by the system, individuals pay more taxes during months when their incomes are high, such as in “bonus” periods, than other months in a year. The t-statistics for means indicates that there exist significant upward deviations during these months.

Keywords: Consumption smoothing; Local income tax; Inter-temporal decision making; Mean test; Levene test. (search for similar items in EconPapers)
JEL-codes: E62 H24 H31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:rmk:rmkbae:v:9:y:2022:i:2:p:147-158

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