GABRIELLA MASSENZ
GABRIELLA MASSENZ
We study responsiveness of owner-managed companies to a corporate income tax kink using Dutch tax records linking firms to their owners. The corporate taxable income elasticity (CETI) is 0.08, but tax sensitivity is over three times higher for firms using specific investment deductions. These are generous, allow for large depreciation and include assets that can reflect owner-managers’ consumption. The CETI rises with deductions’ use and is higher for large firms in industries with easy access to them. We document persistence at the kink, which is driven by large firms using deductions and whose owner-managers repeatedly target personal income tax kinks.
Changes to loss offset rules are often used as a fiscal stimulus measure in times of crisis to alleviate firms' constraints and support the economy. The effect of these measures has been assessed in the literature using large listed firms, but there is no evidence on the effect of these policies on small private firms so far. We study a temporary change in the loss carry-back period implemented in the Netherlands over 2009-2011 using administrative and tax return data on small private corporations. Using a difference-in-difference set up and matching techniques, we show that an additional year of carry-back has a significant effect on treated firms' investments, but no significant effect on firms' survival, employment and profits. The positive effect on investments is not driven by equity injections but rather by debt increases. Crucially, the significance of the effect on investments is conditional on the size of the additional carry-back.
We study how differential taxation of personal and corporate income impacts the corporate share of new firms for 31 countries over 1998-2018. We build a novel database that identifies the tax treatment of partnerships either as corporations or pass-through entities. We find a tax elasticity of 0.07 for the period 1998-2007 and of 0.12 for 2008-2018. Estimates are larger for countries where the presence of partnerships is non-negligible and where they are treated as pass-through for tax purposes, suggesting that the tax sensitivity of organizational form choice interacts with the relevance of partnerships and their tax treatment.
We study the effect of the reduction in the VAT rate on hairdresser services from 17.5 to 6% in the Netherlands in January 2000. Following Kosonen (J Public Econ 131:87–100, 2015), we use differences-in-differences to estimate the effects of this reform, with beauty salons as the main control group. In our preferred specification, we find close to full pass-through of the VAT cut into lower prices. However, we find no statistically or economically significant effect on the volume of sales or employment.
This thesis investigates how features of the tax system influence the behavior of business owners and their firms. The first chapter examines how differential taxation of personal and corporate income impacts firms’ legal form choice. The second chapter explores how closely held corporations and their owners respond to corporate tax incentives. Specifically, it investigates the main channels of adjustment, the main predictors of responsiveness, persistence in firms’ and director-owners’ behavior, and the link between personal and corporate taxable income optimization. Finally, the third chapter studies the effect of a fiscal stimulus policy that temporarily changed loss carry-back rules on small and medium corporations’ survival, employment, investments, and profits.