Arbeitspapier

How do Small Firms Respond to Tax Schedule Discontinuities? Evidence from South African Tax Registers

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We study the responsiveness of small and medium-sized firms to a small-business corporate income tax schedule using population-wide administrative data from South Africa. We find sizeable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp, and reacts immediately to changes in the location of the kink points. These observations suggest that a sizeable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked to underreporting of sales and legal tax-planning activities.

Language: Englisch

Bibliographic citation: Series: CESifo Working Paper ; No. 7277

Classification: Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Firm
Microeconomic Analyses of Economic Development

Subject: corporate taxation
small firms
emerging economies
bunching

Event: Geistige Schöpfung

(who): Boonzaaier, Wian
Harju, Jarkko
Matikka, Tuomas
Pirttilä, Jukka

Event: Veröffentlichung

(who): Center for Economic Studies and ifo Institute (CESifo)

(where): Munich

(when): 2018

Handle: http://hdl.handle.net/10419/185475

Last update: 10.03.2025, 11:44 AM CET

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Object type

Arbeitspapier

Associated

Boonzaaier, Wian
Harju, Jarkko
Matikka, Tuomas
Pirttilä, Jukka
Center for Economic Studies and ifo Institute (CESifo)

Time of origin

2018

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