Are small business owners more successful in avoiding taxes: Evidence from Sweden
Åsa Hansson ()
No 2009:6, Working Papers from Lund University, Department of Economics
It is commonly argued that high tax rates motivate individuals to start a business as it is easier to avoid and evade taxes if self-employed compared to employed. If this is the case we would expect small business owners to be more responsive to tax rate changes than employees. This study investigates how responsive existing small business owners are to tax rate changes by estimating the elasticities of taxable income, gross income and reported income from business ventures for small business owners and contrast them to corresponding elasticities for employees. This is done by using a particularly rich Swedish data set and the 1990/91 Swedish tax reform as a “natural experiment”. I find that small business owners’ taxable income is about twice as responsive to tax rate changes than employees’. When it comes to reported income from business ventures the difference between small business owners and employees are even greater. For gross disposable income, however, business owners are not more responsive. This is consistent with the hypothesis that small business owners have greater means to shift income between different income sources in order to avoid taxation.
Keywords: Taxable income elasticities; tax avoidance (search for similar items in EconPapers)
JEL-codes: H24 H26 J24 (search for similar items in EconPapers)
Pages: 20 pages
New Economics Papers: this item is included in nep-ent and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2009_006
Access Statistics for this paper
More papers in Working Papers from Lund University, Department of Economics Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Edgerton ().