Does the marginal tax rate affect activity in the informal sector? Soren Leth-Petersen and Peer Ebbesen Skov
By: Leth Petersen, Søren
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Contributor(s): Skov, Peer Ebbesen.
Material type: 
ArticlePublisher: 2021Subject(s): ECONOMIA OCULTA | CAPITAL HUMANO | ELUSION FISCAL | IMPUESTOS | TIPO MARGINAL | REFORMA | DINAMARCA
In:
FinanzArchiv v. 77, n. 4, December 2021, p. 317-344Summary: This paper uses longitudinal survey data to analyze the sensitivity of informal-sector earnings to a tax reform that reduced the Danish top marginal tax rate from 63 to 56 percent. Studying a general-population representative sample, we find no evidence of informal-sector labor-supply changes caused by the reform. Looking specifically at a sample of vocationally trained males with income close to the tax threshold, we find a significant decrease in the informal-sector participation rate. The evidence shows that taxpayers' understanding of the reform correlates with the response. Finally, back-of-the-envelope calculations show the economic impact is limited.
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| Artículos | IEF | IEF | OP 207/2021/4-1 (Browse shelf) | Available | OP 207/2021/4-1 |
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Resumen.
This paper uses longitudinal survey data to analyze the sensitivity of informal-sector earnings to a tax reform that reduced the Danish top marginal tax rate from 63 to 56 percent. Studying a general-population representative sample, we find no evidence of informal-sector labor-supply changes caused by the reform. Looking specifically at a sample of vocationally trained males with income close to the tax threshold, we find a significant decrease in the informal-sector participation rate. The evidence shows that taxpayers' understanding of the reform correlates with the response. Finally, back-of-the-envelope calculations show the economic impact is limited.
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