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Who participates in tax avoidance?

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  • Alstadsæter, Annette
  • Jacob, Martin

Abstract

This paper analyzes the sources of heterogeneity in legal tax avoidance strategies across individuals. Three conditions are required for a taxpayer to participate in tax avoidance: incentive, access, and awareness. Using rich Swedish administrative panel data with a unique link between corporate and individual tax returns, we analyze individual participation in legal tax planning around the 2006 Swedish tax reform. Our results suggest that closely held corporations are utilized to facilitate income shifting across tax bases to reduce the individual's overall tax burden. We find that both tax incentives and awareness of tax incentives impact the decision to access income-shifting opportunities. Our results show that factors explaining participation in legal tax avoidance substantially differ from those explaining participation in illegal tax evasion. --

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Paper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 148.

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Date of creation: 2013
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Handle: RePEc:zbw:arqudp:148

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Keywords: Tax avoidance; Income shifting; Income taxation; Dividend taxation;

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  15. Amy Finkelstein, 2009. "E-ZTAX: Tax Salience and Tax Rates," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 969-1010, August.
  16. Damon Jones, 2012. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 158-85, February.
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