Dividend Taxes and Income Shifting

43 Pages Posted: 12 Jun 2014

See all articles by Annette Alstadsæter

Annette Alstadsæter

School of Economics and Business, NMBU

Martin Jacob

University of Navarra, IESE Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 18, 2014

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 firm- and 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

JEL Classification: H21, H25, H3

Suggested Citation

Alstadsaeter, Annette and Jacob, Martin, Dividend Taxes and Income Shifting (March 18, 2014). Available at SSRN: https://ssrn.com/abstract=2449188 or http://dx.doi.org/10.2139/ssrn.2449188

Annette Alstadsaeter (Contact Author)

School of Economics and Business, NMBU ( email )

Norwegian University of Life Sciences
As
Norway

HOME PAGE: http://https://sites.google.com/view/annettealstadsater/start

Martin Jacob

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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