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Heterogeneity and Persistence in Tax Responsiveness: Evidence from Owner-Managed Companies

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Abstract

We study responsiveness of owner-managed companies to a corporate income tax kink using Dutch tax records linking firms to their owners. The corporate taxable income elasticity (CETI) is 0.08, but tax sensitivity is over three times higher for firms using specific investment deductions. These are generous, allow for large depreciation and include assets that can reflect owner-managers’ consumption. The CETI rises with deductions’ use and is higher for large firms in industries with easy access to them. We document persistence at the kink, which is driven by large firms using deductions and whose owner-managers repeatedly target personal income tax kinks.

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  • Massenz, Gabriella, 2024. "Heterogeneity and Persistence in Tax Responsiveness: Evidence from Owner-Managed Companies," Working Paper Series 1503, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1503
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    Cited by:

    1. Agostini, Claudio & Asatryan, Zareh & Bach, Laurent & Bernier, Govindadeva & Berthana, Marinho & Bilicka, Katarzyna & Brockmeyer, Anne & Bukovina, Jaroslav & Falcone, Guillermo & Garriga, Pablo & He, , 2026. "The Elasticity of Corporate Taxable Income Across Countries," CEPR Discussion Papers 21274, Centre for Economic Policy Research.
    2. Massenz, Gabriella, 2025. "Tax-Motivated Firm Splitting," Working Paper Series 1539, Research Institute of Industrial Economics.
    3. Dustin L. Swonder & Damián Vergara, 2025. "A Sufficient Statistics Approach to Optimal Corporate Taxes," NBER Working Papers 34517, National Bureau of Economic Research, Inc.

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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