TY - JOUR
T1 - Vat notches, voluntary registration, and bunching
T2 - Theory and u.k. evidence
AU - Liu, Li
AU - Lockwood, Ben
AU - Almunia, Miguel
AU - Tam, Eddy H.F.
N1 - Funding Information:
We acknowledge financial support from the ESRC under grant ES/L000016/1.
Publisher Copyright:
© 2019 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2021/3
Y1 - 2021/3
N2 - Using administrative tax records for U.K. businesses, we document both bunching in annual turnover belowtheVAT 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.
AB - Using administrative tax records for U.K. businesses, we document both bunching in annual turnover belowtheVAT 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.
UR - http://www.scopus.com/inward/record.url?scp=85101985812&partnerID=8YFLogxK
U2 - 10.1162/rest_a_00884
DO - 10.1162/rest_a_00884
M3 - Article
AN - SCOPUS:85101985812
SN - 0034-6535
VL - 103
SP - 151
EP - 164
JO - REVIEW OF ECONOMICS AND STATISTICS
JF - REVIEW OF ECONOMICS AND STATISTICS
IS - 1
ER -