Year-End Tax Planning of Top Management: Evidence from High-Frequency Payroll Data
- (pp. 154-58)
Abstract
Using Danish high-frequency payroll data and tax reform variation, we detect year-end tax avoidance among top managers. Five to seven percent of top managers exploit year-end tax planning strategies to save taxes. Around 30 percent of the top managers engaging in year-end tax avoidance do so by retiming bonus payments while the rest shift regular wage income. However, bonus timing is most tax-sensitive. When considering all of the top managers receiving a December bonus, we find that more than one-quarter retime the bonus payment, whereas only 5 percent of those not receiving a bonus shift regular wage income.Citation
Kreiner, Claus Thustrup, Søren Leth-Petersen, and Peer Ebbesen Skov. 2014. "Year-End Tax Planning of Top Management: Evidence from High-Frequency Payroll Data." American Economic Review, 104 (5): 154-58. DOI: 10.1257/aer.104.5.154Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H26 Tax Evasion
- J31 Wage Level and Structure; Wage Differentials
- J33 Compensation Packages; Payment Methods
- M10 Business Administration: General