Tax Evasion and Inequality Alstadsæter, Annette; Johannesen, Niels; Zucman, Gabriel
The American economic review,
06/2019, Volume:
109, Issue:
6
Journal Article
Peer reviewed
Open access
Drawing on a unique dataset of leaked customer lists from offshore financial institutions matched to administrative wealth records in Scandinavia, we show that offshore tax evasion is highly ...concentrated among the rich. The skewed distribution of offshore wealth implies high rates of tax evasion at the top: we find that the 0.01 percent richest households evade about 25 percent of their taxes. By contrast, tax evasion detected in stratified random tax audits is less than 5 percent throughout the distribution. Top wealth shares increase substantially when accounting for unreported assets, highlighting the importance of factoring in tax evasion to properly measure inequality.
Drawing on newly published macroeconomic statistics, this paper estimates the amount of household wealth owned by each country in offshore tax havens. The equivalent of 10% of world GDP is held in ...tax havens globally, but this average masks a great deal of heterogeneity—from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies. We use these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP. Because offshore wealth is very concentrated at the top, accounting for it increases the top 0.01% wealth share substantially in Europe, even in countries that do not use tax havens extensively. It has considerable effects in Russia, where the vast majority of wealth at the top is held offshore. These results highlight the importance of looking beyond tax and survey data to study wealth accumulation among the very rich in a globalized world.
We test whether dividend taxes affect corporate investments. We exploit Sweden's 2006 dividend tax cut of 10 percentage points for closely held corporations and 5 percentage points for widely held ...corporations. Using rich administrative panel data and triple-difference estimators, we find that this dividend tax cut does not affect aggregate investment but that it affects the allocation of corporate investment. Cash-constrained firms increase investment after the dividend tax cut relative to cash-rich firms. Reallocation is stronger among closely held firms that experience a larger tax cut. This result is explained by higher external equity in cash-constrained firms and by higher dividends in cash-rich firms after the tax cut.
•This paper tests the effect of dividend taxation on investment.•We use a triple difference approach around a large dividend tax cut.•Dividend taxation has large effects on allocation of investments.•Reducing the dividend tax rate shifts investments from cash-rich to cash-poor firms.
Third-party reporting and employers’ tax withholding are powerful compliance mechanisms, as long as the employer and employee do not collude to evade. In cooperation with the Norwegian Tax ...Administration we designed a randomized field experiment with unannounced on-site audits. Matching audit data to administrative registers, we provide evidence of collusive tax evasion. We find that firms assigned to be audited increased their subsequent wage reporting on behalf of their employees by 18 percent relative to firms assigned to the control group. The effect is more pronounced among small firms with few employees. Our results document limitations of third-party reporting, but also that these limitations can be counteracted by minor on-site audits.
Tax evasion and tax avoidance Alstadsæter, Annette; Johannesen, Niels; Le Guern Herry, Ségal ...
Journal of public economics,
February 2022, 2022-02-00, Volume:
206
Journal Article
Peer reviewed
•We study substitution between illegal tax evasion and legal tax avoidance.•We find little evidence of increased avoidance when wealthy individuals stop evading.•Cracking down on evasion by the ...wealthy can significantly raise tax payments.
Exploiting rich administrative data and salient policy variation, we study the substitution between illegal tax evasion and legal tax avoidance. By increasing its enforcement effort, the Norwegian government pushed many wealthy individuals to disclose assets previously hidden abroad. We find that the taxes paid by these individuals rise 30% at the time of disclosure and that the rise is sustained over time. After stopping to evade, taxpayers do not start avoiding more. Our results suggest that cracking down on evasion by the wealthy can be an effective way to raise tax revenue, increase tax progressivity, and ultimately reduce inequality.
In 2005, over 8% of Norwegian shareholders transferred their shares to new (legal) tax shelters intended to defer taxation of capital gains and dividends that would otherwise be taxable in the ...aftermath of a reform implemented in 2006. Using detailed administrative data, we identify family networks and describe how take-up of tax avoidance progresses within a network. A feature of the reform was that the eligibility to set up a tax shelter changed discontinuously with individual shareholding of a firm and we use this fact to estimate the causal effect of availability of tax avoidance for a taxpayer on tax avoidance by others in the network. We find that eligibility in a social network increases the likelihood that others will take-up. This suggests that taxpayers affect each other’s decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of optimization frictions in the context of behavioral responses to taxation.
Dividend Taxes and Income Shifting Alstadsæter, Annette; Jacob, Martin
The Scandinavian journal of economics,
October 2016, Volume:
118, Issue:
4
Journal Article
Peer reviewed
Open access
In this paper, we analyze whether a dividend tax cut for owner-managers of closely held corporations encourages income shifting, income generation, or both. We use rich Swedish administrative micro ...data from 2000 to 2011 comprising detailed firm- and individual-level information. We find robust evidence of extensive income shifting across tax bases in response to the 2006 Swedish dividend tax cut. Owner-managers of closely held corporations reclassify earned income as dividend income but do not increase total income. The response is more pronounced for owner-managers with tax incentives and with easier access to income shifting through a high ownership share.
This article empirically examines why not all individuals participate in tax avoidance. We use rich Swedish administrative panel data on all taxpayers, with a link between corporate and individual ...tax returns and document that few individuals utilize legal and observable tax avoidance opportunities. Our results show that there are several frictions in tax avoidance participation. In addition to monetary benefits from tax avoidance (incentives), the opportunity to participate in tax avoidance (access), as well as information and knowledge about these opportunities (awareness), are important factors for the individual's tax avoidance decision. We further show that tax avoidance spreads within communities. The impact of the local network is stronger for non-commuters who live and work in the same municipality.
Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the period 2000–12 for the top 2,000 corporate research and development ...investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes and exploit a new and original dataset on patent box features such as the conditionality on performing research in the country or their coverage. We find that patent boxes have a considerable effect on attracting patents, mostly because of their favourable tax treatment. Patents with high earnings potential are particularly sensitive. Patent boxes with a large coverage also have stronger effects on the location of patents. We also analyse the impact of patent boxes and their tax advantages on local R&D activities and find that R&D development conditions tend to attenuate the dominant fiscal effect of patent boxes.
We use Norwegian administrative data and applications for emergency government support to simulate the magnitude and distribution of business revenue shock due to the COVID-19 pandemic. We rely on it ...to analyze the impact of business support policies available in Norway and the United States by comparing simulated results from the various policies on a common data set. We find that policies supporting payroll and fixed costs that were available in both countries have a similar impact of reducing firms’ economic distress, by cutting the negative effect of the crisis on profitability, liquidity, and solvency by more than a half.
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