Seminar: Tax bunching by owners of small corporations

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Leon Bettendorf (CPB)

Discussant: Bas Jacobs (EUR)

Language: English

Registration: Please register by sending an email to seminars@cpb.nl.

Abstract subject:
In the Netherlands owners of small corporations face taxation of corporate, labour and capital income. Taxation of the latter may be deferred. We study their options for income shifting using bunching techniques. Based on individual tax records over the period 2007-2011 we report three main findings. The first is that the distribution of gross wage income strongly peaks at the legal 'minimum' level. Second, taxable labour income bunches at the cut-offs of the tax brackets. The elasticity of taxable income at the top tax cut-off  ranges from 0.06 to 0.11. Finally, we show that distributed profits strongly responded to the temporary tax cut from 25 to 22% in 2007, which doubled tax revenues on dividends. We reconfirm the importance of intertemporal income shifting for business owners.

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