Escape or Play Again? How Retiring Entrepreneurs Respond to the Wealth Tax

We investigate the impact of wealth taxation on the behavior of entrepreneurs in France. Before 2018, business sales triggered the conversion of tax-exempt business assets into taxable wealth. Using personal tax data, we confirm that retirement of entrepreneurs leads to large annual wealth tax payments. There is no evidence of higher expatriation by entrepreneurs following retirement, but their take-up of tax-favored investments in SMEs increases. The elasticity of such investments to the tax increase is far higher than for charity donations. These investments fall after financial wealth becomes tax-exempt in 2018. This evidence suggests that a wealth tax, combined with tax-favored investment schemes, may have encouraged former entrepreneurs to reinvest their wealth in SMEs.

Keywords: Wealth taxes, private firms, fiscal policy

JEL Classification: H20, H31, H32, E21

Suggested Citation: Suggested Citation

Bach, Laurent and Bozio, Antoine and Guillouzouic, Arthur and Malgouyres, Clément, Escape or Play Again? How Retiring Entrepreneurs Respond to the Wealth Tax (December 1, 2020). Available at SSRN: https://ssrn.com/abstract=3758040 or http://dx.doi.org/10.2139/ssrn.3758040