The public finance literature has modeled income shifting as a decision along the intensive margin even though it involves significant fixed costs, giving rise to an important extensive margin. We show that accounting for this extensive margin has crucial policy implications: the classical...

The public finance literature has modeled income shifting as a decision along the intensive margin even though it involves significant fixed costs, giving rise to an important extensive margin. We show that accounting for this extensive margin has crucial policy implications: the classical...

The public finance literature has modeled income shifting as a decision along the intensive margin even though it involves significant fixed costs, giving rise to an important extensive margin. We show that accounting for this extensive margin has crucial policy implications: the classical...

This paper analyzes the effects of personal income taxation on earnings, formality and business organization choices of agents. I use a tax reform introduced in Pakistan in 2009, which increased taxation of partnership firms substantially relative to other unincorporated firms, as a natural...

Using quasi-experimental variation created by a Pakistani tax reform and administrative data, I estimate behavioral responses to taxation in a low tax capacity environment. I find that taxpayers engage in tax evasion, move into informality, and shift earnings to tax-favored business forms in...

We study the role of cognitive ability for individuals’ tax responsiveness using linked administrative tax and military enlistment registers. Our main finding is that individuals in the top decile of the ability distribution react twice as strong to a large and salient kink point in the...

This paper discusses tax policy measures to reduce corporate tax avoidance by extending taxation in the source country without imposing double taxation. We focus on four options: Bilaterally restricting interest and royalty deductibility, introducing an inverted tax credit system, levying...

We use newly linked tax records to show that the large responses of UK company owner-managers to personal taxes are due to intertemporal income shifting and not to reductions in real business activity. Around half of this shifting is short-term and helps prevent volatile incomes being taxed more...

Owner-managed businesses are a fast growing group; how they respond to tax is central to the challenge of how to tax labour relative to capital incomes. We use newly linked UK tax records to estimate how personal taxes affect the real economic activity and tax avoidance of company...