Summary

Are Closely-Held Firms Tax Shelters?
Author(s):
Annette Alstadsæter, Norwegian University of Life Sciences
Wojciech Kopczuk, Columbia University and NBER
Kjetil Telle, Statistics Norway
Summary:

In 2004 Norwegian authorities introduced dividend taxation for personal (but not corporate) owners which would take effect in 2006. This change provided incentives to maximize dividends in 2004 and 2005, and to retain earnings in the following years. Using Norwegian registry data that covers the universe of non-publicly traded firms, Alstadsætter, Kopczuk, and Telle find that dividend payments responded very strongly to the anticipated reform, but also that much of the response was compensated by injecting shareholder equity. On the other hand, following the reform firms began to retain earnings. While all categories of assets grew, the increase in durable assets categories that include equipment, machinery and company cars is particularly striking. The authors find that personally-owned firms and those that pursued aggressive dividend maximization policies in anticipation of the reform exhibit lower profits and economic activity after the reform, but retain earnings and accumulated assets at a comparable or faster rate than others. The authors interpret these results as indicating both the existence of real tax responses and supporting the notion that in the presence of dividend taxation, closely held firms partially serve as tax shelters.

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In addition to the conference paper, the research was distributed as NBER Working Paper w19609, which may be a more recent version.

The Political Economy of Gasoline Taxes: Lessons from the Oil Embargo
Author(s):
Christopher R. Knittel, Massachusetts Institute of Technology and NBER
Summary:

From 1864 to 1972, the real price of oil fell by, on average, over one percent per year. This trend changed dramatically when prices for crude oil increased by over 650 percent from 1972 to 1980. Policymakers adopted several policies designed to keep oil prices in check and reduce consumption. Absent from these policies were taxes on either oil or gasoline, prompting a long economics literature on the inefficiencies of these policies. In this paper, Knittel reviews the policy discussion related to the transportation sector that occurred at the time through the lens of the printed press. In doing so, he pays particular attention to whether gasoline taxes were "on the table," as well as how consumers viewed the policies that were ultimately adopted. The discussions at the time suggest that meaningful changes in gasoline taxes were on the table, and there seemed to be more public discussion than there is today. Some in Congress and many presidential advisers in the Nixon, Ford, and Carter administrations supported and proposed gasoline taxes. The main roadblocks for taxes were Congress and the American people. Polling evidence at the time suggests that consumers preferred price controls, rationing, and vehicle taxes over higher gasoline taxes or letting gasoline prices clear the market. Given the prominence of rationing and vehicle taxes, it seems difficult to argue that these alternative polices were adopted because they hide their true costs.

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The Impact of Headquarter and Subsidiary Locations on Multinationals' Effective Tax Rates
Author(s):
Kevin S. Markle, Dartmouth College
Douglas Shackelford, University of North Carolina at Chapel Hill and NBER
Summary:

Markle and Shackelford examine effective tax rates (ETRs) for 9,022 multinationals from 87 countries from 2006 to 2011. They find that, despite extensive investments in international tax avoidance, multinationals headquartered in Japan, the United States, and some high-tax European countries continue to face substantially higher worldwide taxes than their counterparts in havens and other less heavily taxed locations. Other findings include: 1, effective tax rates remained steady over the investigation period; 2, entering a tax haven country for the first time results in a slight reduction in the firm's ETR; and 3, ETR changes vary depending on whether the subsidiary is a financial conduit or an operating subsidiary. These results should inform ongoing international tax policy debates and expand scholars' understanding of the taxation of multinationals.

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