Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76558 
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper No. 1018
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The dual income tax provides the self-employed entrepreneur with huge incentives to participate in tax minimizing income shifting to have more of his income taxed as capital income. The Norwegian split model is designed to remove these incentives, but it contains loopholes. The present paper concludes that the split model induces the self-employed entrepreneur to over-invest in firm real capital. In addition, the corporate organizational form serves as a tax shelter for high income entrepreneurs. The higher his income and the higher the difference between the marginal tax rates on labor and capital, the larger the incentives to incorporate.
JEL: 
H24
H25
Document Type: 
Working Paper
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