Tax Return Data Research Articles

Mixed-Methods Analysis of Community-Building Activities in Minnesota Hospitals.

Nonprofit hospitals are required to annually report spending on community-building activities (CBAs) to the Internal Revenue Service. CBAs are actions that address root causes of community health problems such as housing and food insecurity. While addressing these issues is important regardless of location, CBA spending could particularly benefit rural residents who, on average, experience worse health outcomes. However, national CBA spending has historically been extremely low, potentially due to confusion surrounding reporting. This explanatory mixed-methods study sought to illuminate nonprofit hospital spending patterns on CBAs in one state, Minnesota, to understand why spending in this important category is so low. Authors first conducted quantitative analyses of publicly available tax return data for the year 2019' which revealed no statistically significant differences in CBA spending by rural location or hospital system affiliation. Authors then performed a case study of the top spending hospitals' narrative statements provided in nonprofit hospital tax return documents and found significant variation in what is reported as a CBA. We suggest CBA spending be reported differently to reduce confusion and render tax documents more accurate portrayals of nonprofit hospital spending, thereby providing policymakers with needed information to ensure nonprofit hospitals are financially supporting community health.

The Demographics of the CAMT: Insights from Tax Return Data

The Demographics of the CAMT: Insights from Tax Return Data

The Effect of Electronic Data Interchange (EDI) on Improving Tax Compliance Rates

Kosovo's tax administration plays a fundamental role in the state's functioning, carrying out many duties and obligations. In addition to these duties, TAK also acts as a stabilizing element for the macro-fiscal economy. In addition to the importance of human resources, the function of information technology is unquestionably crucial in achieving TAK's objectives. The implementation of information technology has resulted in the mechanization of several processes, simplifying the gathering of data and the distribution of tax responsibilities. Advanced information technology systems have improved communication channels with taxpayers and other individuals or groups involved, promoting increased transparency in tax information management. The adoption of the Electronic Data Exchange (EDI) application has resulted in advantages not just for TAK but also for taxpayers and the general public. There are several benefits to using TAK, such as increased efficiency in processing tax return data, less dependence on people specifically assigned to tax return processing, and a lower likelihood of errors in tax returns. The benefits for taxpayers and citizens include the convenience of filing and paying taxes, the option to do so online at any time, and the ability to access online services without the need for in-person engagement with tax authorities. Another vital part of TAK's employment of information technology is the facilitation of online declarations and payments, as well as digital connections with taxpayers. This progress has led to higher adherence to tax obligations and a decreased incidence of tax evasion.

The Role of External Auditors in Improving the Tax Audit Process in Yemen

The aim of the research is to investigate the role of external auditors in improving the tax audit process in Sana'a, Yemen. Primary data was collected using a questionnaire survey administered to a sample of 60 participants, including 33 employees from the tax authority and 27 licensed external auditors by the Ministry of Industry and Trade in Yemen. The study revealed that external auditors play a significant role in enhancing the quality of tax audits by raising taxpayer awareness of the importance of compliance with tax laws and regulations, thereby improving the levels of trust and credibility in the financial information provided in tax returns. The study recommended the application of international audit quality standards and emphasized the need to enhance trust and credibility among tax examiners in the tax returns prepared by external auditors according to audit quality standards, ensuring fairness, accuracy, and reliability of tax return data. The research highlights the importance of external auditing in improving the tax audit process in Yemen and underscores the importance of increasing awareness and adherence to external audit quality standards.

Climbing the economic ladder: Earnings inequality and intragenerational mobility among Thai formal workers

This paper investigates inequality and intragenerational economic mobility among formal workers in a developing country with large inequality. Understanding economic mobility is important because it shapes our perception of inequality. Despite its significance, evidence on intragenerational mobility, especially that based on administrative data, is relatively limited in developing countries. Using Thailand’s tax return data, we study the evolution of earnings inequality, estimate medium-term earnings mobility, and examine the heterogeneity of mobility across age, gender and employment arrangement. Our analysis yields three main findings. First, annual earnings inequality rises during the 2009–2018 period. We find that the inequality is largely permanent, and its increase is primarily driven by top-earnings workers. Second, medium-term mobility tends to be limited at both ends of the earnings distribution, with particularly pronounced persistence observed at the top decile. Our suggestive comparison indicates that Thailand’s earnings mobility is among the lowest in the pool of evidence from both developed and developing countries. Third, there is a considerable heterogeneity in mobility regarding employment arrangement. Workers in less-formal jobs have much lower upward mobility than those in more-formal employment. Our findings also indicate significant heterogeneity in mobility with respect to gender and age.

Accuracy and errors in self-assigned NAICS codes in tax return data

Conventional wisdom holds that North American Industry Classification System (NAICS) codes chosen by people not experienced with the system are often mis-specified, but there has been little formal research into the scope of the problem. In this paper we explore prevalence of and patterns in misspecification in NAICS codes self-reported on two kinds of business tax forms. Errors are identified by comparing as-filed codes with codes validated by Statistics of Income. We find that over a third of codes are wrong, but that the errors are not random and often (though not always) seem to have logical reasons behind them.

Uptake of formal childcare among second generation and native mothers in Belgium: can increasing local childcare availability narrow migrant-native gaps?

Research indicates that the uptake of formal childcare for children under age 3 is lower among migrant origin parents than among native parents in most European countries, and that these differentials extend to the second generation. Despite considerable investments in formal childcare availability in many European countries, it remains unclear whether and to what extent expanding local childcare availability effectively diminishes migrant-native uptake differentials due to the lack of longitudinal research. Therefore, this study assesses for Belgium to what extent expansions in childcare availability within municipalities in the period 2010–2014 has increased the uptake of formal childcare for children under age 3 among households where the mother has a second generation Southern European, Maghreb or Turkish background, versus no migration background. We use longitudinal census and register data for Belgium that were linked to longitudinal tax return data on childcare expenses and municipality-level data on childcare availability for children aged 0–3. Our results show that Southern European and Turkish origin mothers become more likely to use formal childcare when childcare places become more widely available within their municipalities, but also that the uptake gap with native mothers persists, since there is no differential effect of increasing local childcare availability. Since local childcare expansions entail a slightly stronger increase in formal childcare uptake among Maghreb origin mothers compared to native mothers, this results in slightly decreasing migrant-native uptake gaps, although considerable uptake gaps remain. To our knowledge, this is the first longitudinal study addressing the relationship between local childcare availability and uptake differentials by migration background. This study can inspire avenues for follow-up research which could provide additional insight into the possible mechanisms behind the varying effects of increasing local childcare availability by migration background and the persisting migrant-native uptake gaps.

Summaries of Articles

Summaries of Articles

Tax Credit Refundability and Child Care Prices: Evidence from California

A common critique of nonrefundable tax credits is that benefits are limited for low-income households. Costs often dominate the refundability debate, yet how much households benefit from refundability depends on the incidence of the credit in question. California provides a unique opportunity to study how eliminating refundability of child care tax credits affects child care prices while holding other policy dimensions fixed. Using county-level price and tax return data, this study finds that nonrefundability corresponds with lower child care prices. If the price response is symmetrical and quality adjustments are limited, refundability may benefit low-income families less than the cost of the program would suggest.

Criminal Justice Involvement, Self‐Employment, and Barriers in Recent Public Policy

AbstractThis study provides the first empirical evidence on the extent of self‐employment within the U.S. justice‐involved population. Using linked tax return and Criminal Justice Administrative Records System data, we find that 28 percent of individuals with criminal records are self‐employed. Justice‐involved individuals are 22 percent more likely to rely solely on self‐employment. The Paycheck Protection Program, passed to support small business during the COVID‐19 pandemic, initially disqualified those with a broad range of criminal histories. We find that close to 3 percent of recent sole proprietors had observable PPP disqualifying events based on initial eligibility criteria, with a disparate impact on Black and Hispanic business owners.

IPOs and Corporate Tax Planning

Does going public affect the amount and type of corporate tax planning? Using a panel of U.S. corporate tax return data from 1994 to 2018, we show that IPO completion is associated with the implementation of multinational income shifting strategies central to the current international tax policy debate. Specifically, firms (i) expand their foreign tax haven presence, (ii) enter into cross-border agreements that accompany intangible asset transfers to foreign subsidiaries, and (iii) increase their level of foreign related-party payments around the time that they go public. The effects are strongest among firms that switch to more sophisticated tax advisors in the years preceding the IPO. In contrast, we observe little domestic tax planning because large stock option deductions, which increase as a consequence of the IPO, provide large domestic tax shields. The paper contributes to the nascent literature studying IPOs by documenting the types and timing of specific tax strategies that enable public firms to remain lightly taxed in the post-IPO period. Furthermore, the findings imply that U.S. tax policies targeted at early-stage innovative firms are critical for retaining domestically developed IP – and the income earned on such assets – for the U.S. tax base.

ARE FINANCIAL INSTITUTIONS TAX AGGRESSIVE? EVIDENCE FROM CORPORATE TAX RETURN DATA

This study examines how financial firms’ tax aggressiveness differs from their peers in other sectors. Using confidential tax return data of the 5,968 largest Indonesian firms from 2009 to 2017, our study finds financial firms to have lower tax burdens relative to their non-financial counterparts, suggesting more opportunities for tax avoidance. Further, we document simultaneous use of tax shelters and temporary and permanentdifferences between accounting standards and tax laws, indicating a tendency to use the most sophisticated and less costly techniques in minimising tax burdens. These findings suggest tax aggressiveness may be one important unintended consequence of the government’s conventional prudential policy.

The effects of a tax deduction for lifelong learning expenditures

We study the effects of a tax deduction for lifelong learning, exploiting exogenous variation in the effective costs of lifelong learning due to jumps in tax bracket rates. We use a regression kink design and tax return data on the universe of Dutch taxpayers. Low-income individuals show no response, but high-income individuals are more likely to report lifelong learning expenditures (though not a higher amount) when net costs are lower. Furthermore, for high-income individuals the effect peaks at the age interval 40–45 years of age.

Threshold-dependent tax enforcement and the size distribution of firms: evidence from Germany

This paper investigates firms’ responses to threshold-dependent intensity of tax enforcement. We use administrative tax return data over the entire population of German firms and exploit industry variation in firm size thresholds applied by the tax administration. In our setting, each threshold marks a considerable spike in audit intensity and hence should create strong incentives to bunch below the threshold. However, we find no such effect in our large sample analysis. We attribute this empirical observation to optimization costs, particularly to the costs associated with the operational implementation of size management and to information costs. Our paper adds to the emerging field of studies on potential distortions created by threshold-dependent firm regulation. The findings are also relevant for policymakers, as they suggest that the specific design of threshold-dependent policies might allow governments to increase the efficiency of tax audits without distorting the firm size distribution.

Mobility responses to the establishment of a residential tax haven: Evidence from Switzerland

I analyze mobility responses to a tax reform that established the Swiss canton of Obwalden as a tax haven in 2006. The reform, which included a regressive income tax schedule, was explicitly aimed at attracting the top 1%. Difference-in-Differences (DiD) estimations comparing Obwalden to all other cantons confirm that the reform successfully attracted high-income taxpayers: by 2016, the share of top earners in the canton had doubled, and average income per taxpayer was 16% higher relative to 2005. Based on individual tax return data, I estimate the mobility elasticity with a two-stage least square (2SLS) approach, which isolates the identifying variation in the tax rate stemming from the 2006 reform only. I find a large elasticity of the stock of high-income taxpayers of 1.5–2 with respect to the net-of-average-tax rate. The corresponding flow elasticity is 7.2. Despite these large behavioral responses, the reform did not increase revenue per capita in the canton. Finally, I find small positive effects on local employment. However, in-movers with high incomes were not more likely to also work in the canton, and I cannot rule out that employment effects were driven by the simultaneous reduction in corporate income taxes.

NAICS Code Prediction Using Supervised Methods

When compiling industry statistics or selecting businesses for further study, researchers often rely on North American Industry Classification System (NAICS) codes. However, codes are self-reported on tax forms and reporting incorrect codes or even leaving the code blank has no tax consequences, so they are often unusable. IRSs Statistics of Income (SOI) program validates NAICS codes for businesses in the statistical samples used to produce official tax statistics for various filing populations, including sole proprietorships (those filing Form 1040 Schedule C) and corporations (those filing Forms 1120). In this article we leverage these samples to explore ways to improve NAICS code reporting for all filers in the relevant populations. For sole proprietorships, we overcame several record linkage complications to combine data from SOI samples with other administrative data. Using the SOI-validated NAICS code values as ground truth, we trained classification-tree-based models (randomForest) to predict NAICS industry sector from other tax return data, including text descriptions, for businesses which did or did not initially report a valid NAICS code. For both sole proprietorships and corporations, we were able to improve slightly on the accuracy of valid self-reported industry sector and correctly identify sector for over half of businesses with no informative reported NAICS code.

Taxes and Firm Size: A 40-Year Perspective

We examine the statutory incidence of the federal corporate tax on firms by asset size over a 40-year period spanning numerous tax changes. In contrast to previous studies, which have been based upon financial statement measures of effective tax rates, we examine the relation between taxes and asset size using published tax return data and a common measure of distribution. The results suggest that the corporate tax burden has become relatively proportional to firm size over the last 40 years, only slightly favoring larger firms.

Effective Tax Rate Time Trends and its Determinants: Insight From The Corporate Taxpayer Utilising Reinvestment Allowance In Malaysia

This study aims to provide evidence on the trend in corporate tax revenue from the application of time-trend analysis of effective tax rate (ETR) amongst corporate taxpayers in Malaysia who claimed reinvestment allowance (RA) over a decade between 2007 and 2016. This study chose these observation periods because the Malaysian corporate STR has been found to have gradually reduced from 27 per cent to 24 per cent between 2007 to 2016, whereby these changes somehow impacted the tax revenue. Taxpayers who used RA for tax planning pay low taxes over time, determined through tax return data. Then, the study intended to examine the relationships between certain tax attributes, namely, company's profitability (ROA), the reinvestment allowance utilisation rate (RAUTI), type of corporate taxpayers (TPP), the book-tax gap (BTG) and how they associate to the trend in ETR. Reinvestment Allowance (RA) is renowned for being a corporate tax incentive in Malaysia to encourage investments in qualified projects through a tax deduction. An incentivised firm that pays low tax may not be engaging in fraudulent management, as generally assumed. However, it could have been due to tax avoidance strategies that can be observed through reduced or lowered effective tax rate (ETR) across ten years. Keywords: Effective Tax Rates, Tax Avoidance, Reinvestment Allowance, Tax Incentive, Taxation.

Issues associated with the use of National Health Insurance contributions in determining public policy program beneficiaries

ABSTRACT Scholars, practitioners, and policymakers agree that the eligibility criteria used for determining welfare benefit recipients must be efficient, equitable, and possess few measurement errors. This study analyzes Korea’s system of using contributions to the National Health Insurance as an eligibility criterion for determining welfare benefit recipients and evaluates whether the system has these aforementioned characteristics, using the case of the COVID-19 stimulus payment distributed in the city of Jeonju. The analysis shows that while the system is favorable from an efficiency perspective, it is less desirable in terms of the other two characteristics. Based on the findings, this study proposes using tax return and employment insurance data, as such databases can help solve the equity and measurement error issues associated with the use of the current system.

What Accounts for the Rising Share of Women in the Top 1 percent?

The share of women in the top 1 percent of the UK’s income distribution has been growing over the last two decades (as in several other countries). Our first contribution is to account for this trend using regressions of the probability of being in the top 1 percent, fitted separately for men and women, in order to contrast between the sexes the role of changes in characteristics and changes in returns to characteristics. We show that the rise of women in the top 1 percent is primarily accounted for by their greater increases in the number of years spent in full‐time education. Although most top income analysis uses tax return data, we derive our findings taking advantage of the much more extensive information about personal characteristics that is available in survey data. Our use of survey data requires justification given survey under‐coverage of top incomes. Providing this justification is our second contribution.