How do small firms respond to tax schedule discontinuities? Evidence from South African tax registers

Wian Boonzaaier, Jarkko Harju, Tuomas Matikka and Jukka Pirttilä

No 85, Working Papers from VATT Institute for Economic Research

Abstract: We study the responsiveness of small and medium-sized firms to corporate income taxes using population-wide administrative data from South Africa. We find sizable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp, and reacts immediately to changes in the location of the kink points. These observations suggest that a sizable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked with underreporting of sales and legal tax planning activities.

Keywords: corporate taxation; small firms; emerging economies; bunching; yritysverotus; pienet ja keskisuuret yritykset; kasvavat taloudet; Social security; taxation and inequality; H21; H25; H32; O12 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-acc, nep-ent, nep-iue and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.doria.fi/handle/10024/148922

Related works:
Journal Article: How do small firms respond to tax schedule discontinuities? Evidence from South African tax registers (2019)
Working Paper: How do Small Firms Respond to Tax Schedule Discontinuities? Evidence from South African Tax Registers (2018)
Working Paper: How do small firms respond to tax schedule discontinuities?: Evidence from South African tax registers (2016)
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