Who Understands The French Income Tax? Bunching Where Tax Liabilities Start

Qui comprend l'impôt sur le revenu ? Réactions comportementales au seuil d'entrée dans le barème

Raphaël Lardeux
Additional contact information
Raphaël Lardeux: INSEE - Institut national de la statistique et des études économiques (INSEE)

Working Papers from HAL

Abstract: Lack of tax transparency may strongly impact taxpayers' behavior. This paper disentangles responses to incentives from attention to taxes at the level where French income tax liabilities start. When reporting their earnings, tax filers may be confused between two potential thresholds: the true Tax Collection Threshold (TCT), a notch, and a wrong Taxation Threshold (TT), which is a kink. Using a comprehensive dataset on individual income tax returns from 2008 to 2015, I highlight significant bunching in the taxable income distribution at both thresholds. Within a model of tax misperception, I estimate that taxpayers are far from paying full attention to the income tax system, yet display strong reactions to the marginal tax rate they perceive. This framework can account for behavioral responses to a rise in the virtual marginal tax rate at the wrong threshold and may prove useful to detect policies improving attention to taxes. Contrasting hard-copy and online tax filers, the misperception model reveals a better understanding of the tax system by the latter.

Keywords: Internet; misperception; Income tax; bunching; attention; perception erronée; accumulation; Impôt sur le revenu (search for similar items in EconPapers)
Date: 2018-07
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05410537v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://insee.hal.science/hal-05410537v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05410537

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().