Journal
REVIEW OF ECONOMICS AND STATISTICS
Volume 103, Issue 1, Pages 151-164Publisher
MIT PRESS
DOI: 10.1162/rest_a_00884
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Funding
- ESRC [ES/L000016/1]
- ESRC [ES/L000016/1, ES/F037864/1] Funding Source: UKRI
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Using administrative tax records for U.K. businesses, the study found both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. A conceptual framework was developed to explain these phenomena and predicted factors leading to voluntary registration, which were found to be opposite for bunching. Empirical support was found for these predictions using linked VAT and corporation tax records from 2004 to 2014.
Using administrative tax records for U.K. businesses, we document both bunching in annual turnover below the VAT 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.
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