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Dividend taxes and income shifting

Annette Alstadsæter () and Martin Jacob

No 154, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: This paper analyzes whether a dividend tax cut for owner-managers of closely held corporations encourages income shifting, income generation, or both. We use rich, micro data from Sweden for the period 2000 - 2011 comprising the entire Swedish population, as well as firmand individual-level data for all owner-managers in closely held corporations, partnerships, and self-employed. We find robust evidence of extensive income shifting across tax bases in response to the 2006 dividend tax cut. Relative to owners of unincorporated businesses, owner-managers of closely held corporations do not increase total income. Instead, they relabel earned income as dividend income. The income shifting effect is stronger for owner-managers with tax incentives and with easier access to income shifting through a high ownership share.

Keywords: income shifting; income generation; dividend taxes; closely held corporations; owner-managers (search for similar items in EconPapers)
JEL-codes: H21 H25 H3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Date: 2014
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https://www.econstor.eu/bitstream/10419/95958/1/782282393.pdf (application/pdf)

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Journal Article: Dividend Taxes and Income Shifting (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:arqudp:154

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