Social Networks and Tax Avoidance: Evidence from a Well-Defined Norwegian Tax Shelter

53 Pages Posted: 29 Oct 2018

See all articles by Annette Alstadsæter

Annette Alstadsæter

School of Economics and Business, NMBU

Wojciech Kopczuk

Columbia University - Graduate School of Arts and Sciences - Department of Economics; Columbia University - School of International & Public Affairs (SIPA); National Bureau of Economic Research (NBER)

Kjetil Telle

Statistics Norway - Research Department

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Date Written: October 2018

Abstract

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 2006 reform. 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 ability 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 take up 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.

Suggested Citation

Alstadsaeter, Annette and Kopczuk, Wojciech and Telle, Kjetil, Social Networks and Tax Avoidance: Evidence from a Well-Defined Norwegian Tax Shelter (October 2018). NBER Working Paper No. w25191, Available at SSRN: https://ssrn.com/abstract=3274417

Annette Alstadsaeter (Contact Author)

School of Economics and Business, NMBU ( email )

P.O. Box 5003
NO-1432 Aas
Norway

HOME PAGE: http://www.nmbu.no/emp/annette.alstadsater

Wojciech Kopczuk

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

Columbia University - School of International & Public Affairs (SIPA)

420 West 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kjetil Telle

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway

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