VAT Notches, Voluntary Registration, and Bunching: Theory and UK Evidence

Li Liu, Ben Lockwood, Miguel Almunia and Eddy Tam

No 2019/205, IMF Working Papers from International Monetary Fund

Abstract: Using administrative tax records for UK businesses, we document both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. We develop a conceptual framework that can simultaneously explain these two apparently conflicting facts. The framework also predicts that higher intermediate input shares, lower product-market competition and a lower share of business to consumer (B2C) sales lead to voluntary registration. The predictions are exactly the opposite for bunching. We test the theory using linked VAT and corporation tax records from 2004-2014, finding empirical support for these predictions.

Keywords: WP; unit cost; standard deviation; Value‐Added Tax (VAT); Voluntary Registration; Bunching; year dummy; input cost ratio; account database; responses to notch; turnover net; Value-added tax; VAT registration thresholds; Compliance costs; Competition; Corporate income tax; value-added tax system; VAT threshold; H.F. tam; system in the UK (search for similar items in EconPapers)
Pages: 78
Date: 2019-09-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=48669 (application/pdf)

Related works:
Journal Article: VAT Notches, Voluntary Registration, and Bunching: Theory and U.K. Evidence (2021)
Working Paper: VAT Notches, Voluntary Registration, and Bunching: Theory and UK Evidence (2019)
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:imf:imfwpa:2019/205

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().