Discussion Papers no. 886

Social networks and tax avoidance: Evidence from a well-defined Norwegian tax shelter

In 2005, over 8% of Norwegian shareholders transferred their shares to new (legal) tax shelters intended to defer taxation of capital gains and dividends that would otherwise be taxable in the aftermath of 2006 reform.

Using detailed administrative data we identify family networks and describe how take up of tax avoidance progresses within a network. A feature of the reform was that the ability to set up a tax shelter changed discontinuously with individual shareholding of a firm and we use this fact to estimate the causal effect of availability of tax avoidance for a taxpayer on tax avoidance by others in the network. We find that take up in a social network increases the likelihood that others will take up. This suggests that taxpayers affect each other's decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of “optimization frictions” in the context of behavioral responses to taxation.

 

About the publication

Title

Social networks and tax avoidance: Evidence from a well-defined Norwegian tax shelter

Author

Annette Alstadsæter, Wojciech Kopczuk, and Kjetil Telle

Series and number

Discussion Papers no. 886

Publisher

Statistisk sentralbyrå

Topic

Discussion Papers

ISSN

1892-753X

Number of pages

54

About Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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