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The Response of Firms to Eligibility Thresholds: Evidence from the Japanese Value-Added Tax

Kazuki Onji

Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University

Abstract: It is common to define benefit eligibility for small business policies by restrictions on the fi rm size. This paper investigates the incentives for a large fi rm to masquerade as many small firms by separately incorporating business segments, focusing on the case of the Japanese value-added tax. The paper fi nds that the masquerading was pervasive and took place quickly after the introduction of tax incentives. Tax avoidance caused 3.4 per cent of the overall revenue drain in 1990, thus reducing horizontal equity, but the effi ciency consequence would not have been severe. This study suggests that the masquerading by firms may be commonplace in other settings.

JEL-codes: H32 H25 L22 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2008
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Downloads: (external link)
https://crawford.anu.edu.au/pdf/pep/apep-370.pdf (application/pdf)

Related works:
Journal Article: The response of firms to eligibility thresholds: Evidence from the Japanese value-added tax (2009) Downloads
Working Paper: The Response of Firms to Eligibility Thresholds: Evidence from the Japanese Value-Added Tax (2008) Downloads
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