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Tax Bunching, Income Shifting and Self-employment

Daniel le Maire () and Bertel Schjerning

No 2012-04, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the case of Danish self-employed. If income shifting was neglected in this case, we would conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the observed bunching in taxable income for the self-employed is driven by intertemporal income shifting, implying a structural elasticity in the range of 0.14-0.20

Keywords: Self-employment; tax bunching; retained pro?ts; tax avoidance; income shifting (search for similar items in EconPapers)
JEL-codes: H20 J20 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-05
New Economics Papers: this item is included in nep-acc, nep-iue, nep-pbe and nep-pub
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Journal Article: Tax bunching, income shifting and self-employment (2013) Downloads
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