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Tax avoidance and ownership structure: Evidence from Norway

Awarded: NOK 0.55 mill.

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2010 - 2011

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The Shareholder income tax was introduced in 2006, but until now there has been little empirical evaluation of the effect of this in theory neutral tax on the behaviour of owners and firms. We provide an evaluation of the effects of the Shareholder income tax in two particular dimensions: the effects on ownership composition of existing corporations and the effects on the use of holding companies as tax shelters. This information can be used directly in the Norwegian evaluation of the recent tax reform, a nd as input in the design of future reforms. In identifying and analyzing specific determinants of pursuing tax avoidance strategies, we are interested in exploring the extent to which social networks and families influence tax avoidance decisions. And do these decisions affect the outcome, such as survival and profit of the firm, and income of the owner from the corporate sector and other income? We will provide evidence for the potential explanation for why otherwise similar taxpayers make different t ax compliance decisions. We contribute to the international literature on behavioural responses to taxation by opening the black box of behavioural responses by firms, their interaction with individual taxation, and heterogeneity due to individual charac teristics of owners. We are not aware of other empirical work that links tax avoidance with characteristics of taxpayers or that looks at the effect of social networks on the incentives to engage in tax avoidance activities.

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