Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77656
Authors: 
Harju, Jarkko
Kosonen, Tuomas
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4259
Abstract: 
This paper studies the effect of Finnish tax reforms in the mid 1990s on the economic activity and tax avoidance decisions of the owners of small businesses. The reforms reduced income tax rates and increased tax planning incentives for small business owners. They applied only to unincorporated firms. We utilize both a theoretical model and empirical data. The empirical strategy is to use the reforms as a natural experiment to estimate the causal impact of the reforms. The results imply that entrepreneurs react to tax incentives along both real and avoidance margins, while the latter elasticity is larger.
Subjects: 
entrepreneurs
small businesses
tax incidence
JEL: 
H25
H24
H22
Document Type: 
Working Paper

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