Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309509 
Year of Publication: 
2022
Citation: 
[Journal:] International Tax and Public Finance [ISSN:] 1573-6970 [Volume:] 30 [Issue:] 4 [Publisher:] Springer US [Place:] New York, NY [Year:] 2022 [Pages:] 1002-1035
Publisher: 
Springer US, New York, NY
Abstract: 
This paper investigates firms' responses to threshold-dependent intensity of tax enforcement. We use administrative tax return data over the entire population of German firms and exploit industry variation in firm size thresholds applied by the tax administration. In our setting, each threshold marks a considerable spike in audit intensity and hence should create strong incentives to bunch below the threshold. However, we find no such effect in our large sample analysis. We attribute this empirical observation to optimization costs, particularly to the costs associated with the operational implementation of size management and to information costs. Our paper adds to the emerging field of studies on potential distortions created by threshold-dependent firm regulation. The findings are also relevant for policymakers, as they suggest that the specific design of threshold-dependent policies might allow governments to increase the efficiency of tax audits without distorting the firm size distribution.
Subjects: 
Tax enforcement
Size-dependent regulation
Bunching
Administrative data
Germany
JEL: 
H26
H32
K42
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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