Tax bunching by owners of small corporations

Leon Bettendorf, Arjan Lejour, Maarten van 't Riet*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

5 Citations (Scopus)
44 Downloads (Pure)


We study the options for income shifting by owners of small corporations in the Netherlands using bunching techniques on individual tax records over the period 2007-2011. We find that the distribution of gross labour income strongly peaks at the minimum level of the reference wage, specified in the tax code. Next, taxable labour income bunches at the cut-offs of the tax brackets. The elasticity of taxable income at the top tax cut-off ranges from 0.06 to 0.11. Distributed profits strongly responded to the temporary tax cut from 25 to 22% in 2007, which doubled tax revenues on dividends. We reconfirm the importance of intertemporal income shifting for business owners.

Original languageEnglish
Pages (from-to)411-438
Issue number4
Publication statusPublished - Dec 2017


  • Bunching
  • Small corporations
  • Taxable income
  • Income shifting


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