VAT Notches, Voluntary Registration, and Bunching: Theory and U.K. Evidence
Li Liu,
Ben Lockwood,
Miguel Almunia and
Eddy H. F. Tam
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Eddy H. F. Tam: Oxford CBT
The Review of Economics and Statistics, 2021, vol. 103, issue 1, 151-164
Abstract:
Using administrative tax records for U.K. businesses, we document both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. We develop a conceptual framework that can simultaneously explain these two apparently conflicting facts. The framework also predicts that higher intermediate input shares, lower product-market competition, and a lower share of business to consumer sales lead to voluntary registration. The predictions are exactly the opposite for bunching. We test the theory using linked VAT and corporation tax records from 2004 to 2014, finding empirical support for these predictions.
Date: 2021
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Working Paper: VAT Notches, Voluntary Registration, and Bunching: Theory and UK Evidence (2019)
Working Paper: VAT Notches, Voluntary Registration, and Bunching: Theory and UK Evidence (2019)
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