Year-End Tax Planning of Top Management: Evidence from High-Frequency Payroll Data
Claus Thustrup Kreiner, Søren Leth-Petersen, Peer Ebbesen Skov
American Economic Review · 2014 · Volume 104 · Issue 5
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.
Keywords
Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, Tax Evasion, Wage Level and Structure, Wage Differentials, Compensation Packages, Payment Methods, Business Administration: General
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