Year-End Tax Planning of Top Management: Evidence from High-Frequency Payroll Data

Claus Thustrup Kreiner · Søren Leth‐Petersen · Peer Ebbesen Skov

25 citations0/0 files storedAmerican Economic Review

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Corporate Taxation and Avoidance Economic and Fiscal Studies Taxation and Compliance Studies

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.

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References

2000What Happens When You Tax the Rich? Evidence from Executive Compensation 1997What Happens When You Tax the Rich? Evidence from Executive Compensation 1995Income Creation or Income Shifting? Behavioral Responses to the Tax Reform Act of 1986

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