How do entrepreneurial portfolios respond to income taxation

Fossen, Frank M, Rees, Ray, Rostam-Afschar, Davud and Steiner, Viktor (2018) How do entrepreneurial portfolios respond to income taxation. Centre for Business Taxation Working Paper, Oxford.

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Abstract

We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a portfolio choice model that allows for tax sheltering, we show that lower tax rates may increase investment in entrepreneurial equity at the intensive margin, but decrease it at the extensive margin. Using German panel data, we identify tax effects on the portfolio shares of six asset classes by exploiting tax and entry regulation reforms. Our results indicate that lower taxes drive out businesses that are viable only due to tax sheltering, but increase investment in productive entrepreneurial businesses.

Item Type: Other Working Paper
Keywords: Oxford University Centre for Business Taxation; Taxation; entrepreneurship; portfolio choice; tax sheltering; investment
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 18 Jan 2019 13:35
Last Modified: 18 Jan 2019 13:35
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7250

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