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

44 Pages Posted: 18 Feb 2021

See all articles by Laurent Bach

Laurent Bach

ESSEC Business School - Finance Department; Swedish House of Finance

Antoine Bozio

Paris School of Economics (PSE)

Arthur Guillouzouic

Institut des politiques publiques (PSE); Sciences Po - Department of Economics

Clément Malgouyres

Institut des politiques publiques (PSE)

Date Written: December 1, 2020

Abstract

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

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

Laurent Bach (Contact Author)

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Antoine Bozio

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Arthur Guillouzouic

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Clément Malgouyres

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

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