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Taxes and the Choice of Organizational Form by Entrepreneurs in Sweden

Author

Listed:
  • Edmark, Karin

    (Research Institute of Industrial Economics (IFN))

  • Gordon, Roger

    (University of California)

Abstract

This paper estimates the role of both tax and non-tax determinants in the choice in Sweden to be a closely-held corporation vs. a proprietorship, using individual data for 2004 to 2008 on owners of closely-held businesses. While lower-income individuals face relatively neutral incentives, higher income individuals face strong tax incentives to be corporate. The data suggest a relatively strong correlation between these tax incentives and the likelihood that a firm is corporate. Many conventional non-tax determinants are confirmed in the data as well.

Suggested Citation

  • Edmark, Karin & Gordon, Roger, 2013. "Taxes and the Choice of Organizational Form by Entrepreneurs in Sweden," Working Paper Series 982, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0982
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    References listed on IDEAS

    as
    1. Gordon, Roger H. & MacKie-Mason, Jeffrey K., 1994. "Tax distortions to the choice of organizational form," Journal of Public Economics, Elsevier, vol. 55(2), pages 279-306, October.
    2. Jarkko Harju & Tuomas Kosonen, 2012. "The Impact of Tax Incentives on the Economic Activity of Entrepreneurs," Working Papers 1220, Oxford University Centre for Business Taxation.
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    4. Sven-Olov Daunfeldt & Ulrika Praski-Ståhlgren & Niklas Rudholm, 2010. "Do high taxes lock-in capital gains? Evidence from a dual income tax system," Public Choice, Springer, vol. 145(1), pages 25-38, October.
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    7. Thor O. Thoresen & Annette Alstadsæter, 2010. "Shifts in Organizational Form under a Dual Income Tax System," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(4), pages 384-418, December.
    8. Goolsbee, Austan, 2004. "The impact of the corporate income tax: evidence from state organizational form data," Journal of Public Economics, Elsevier, vol. 88(11), pages 2283-2299, September.
    9. Goolsbee, Austan, 1998. "Taxes, organizational form, and the deadweight loss of the corporate income tax," Journal of Public Economics, Elsevier, vol. 69(1), pages 143-152, July.
    10. Ruud A. De Mooij & Gaëtan J.A. Nicodème & Gaëtan J.A. Nicodeme, 2006. "Corporate Tax Policy, Entrepreneurship and Incorporation in the EU," CESifo Working Paper Series 1883, CESifo.
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    12. Jukka Pirttilä & Håkan Selin, 2011. "Income Shifting within a Dual Income Tax System: Evidence from the Finnish Tax Reform of 1993," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 120-144, March.
    13. Romanov, Dmitri, 2006. "The corporation as a tax shelter: Evidence from recent Israeli tax changes," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1939-1954, November.
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    Cited by:

    1. William Gale & Samuel Brown, 2013. "Small Business, Innovation, and Tax Policy: A Review," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(4), pages 871-892, December.
    2. Lejour, Arjan & Massenz, Gabriella, 2020. "Income Shifting and Organizational Form Choice : Evidence from Europe," Other publications TiSEM 3138edef-d645-4113-9981-3, Tilburg University, School of Economics and Management.
    3. Josh Lerner & Joacim Tåg, 2013. "Institutions and venture capital," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 153-182, February.
    4. Pontus Braunerhjelm & Magnus Henrekson, 2013. "Entrepreneurship, institutions, and economic dynamism: lessons from a comparison of the United States and Sweden," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 107-130, February.
    5. Bastani, Spencer & Giebe, Thomas & Miao, Chizheng, 2020. "Ethnicity and tax filing behavior," Journal of Urban Economics, Elsevier, vol. 116(C).
    6. Bräutigam, Rainer & Spengel, Christoph & Stutzenberger, Kathrin, 2017. "The development of corporate tax structures in the European Union from 1998 to 2015 - Qualitative and quantitative analysis," ZEW Discussion Papers 17-034, ZEW - Leibniz Centre for European Economic Research.
    7. Edquist, Harald & Henrekson, Magnus, 2013. "Product Market Reforms and Incentives to Innovate in Sweden," Working Paper Series 986, Research Institute of Industrial Economics.
    8. Massenz, Gabriella, 2023. "On the behavioral effects of tax policy," Other publications TiSEM eb44a9f7-b859-480d-b2e4-4, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Self-employment; Entrepreneurship; Taxation of closely-held businesses; Business organizational form;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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