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How do taxpayers respond to tax subsidy for long-term savings? Evidence from Thailand’s tax return data

Author

Listed:
  • Athiphat Muthitacharoen

    (Chulalongkorn University)

  • Trongwut Burong

    (Revenue Department)

Abstract

This paper uses a panel of personal income tax return data for the population of Thai tax filers to examine how individuals respond to tax subsidy for long-term savings. We utilize the 2013 tax reform that lowered the price subsidy for long-term savings in order to obtain causal identification. Our difference-in-difference analysis illustrates that there is a considerable heterogeneity in the individual responses to the subsidy cut—with middle-income taxpayers responding much more than their high-income counterparts. Among the middle-income group, we also find that the subsidy reduction has larger effects on decisions of smaller contributors. Our findings shed light on the heterogeneity of individual responses which are crucial for policymakers who consider an incremental change in the existing tax incentive scheme.

Suggested Citation

  • Athiphat Muthitacharoen & Trongwut Burong, 2022. "How do taxpayers respond to tax subsidy for long-term savings? Evidence from Thailand’s tax return data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 726-750, June.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:3:d:10.1007_s10797-021-09687-w
    DOI: 10.1007/s10797-021-09687-w
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    Keywords

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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