It’s all about the base: Taxing business owner-managers
Business owner-managers form an important part of the workforce in many countries, including the US and UK. We develop an empirical dynamic model to study the taxation of this group, who commonly benefit from preferential tax rates aimed at boosting entrepreneurship and investment. We study all UK owner-managed businesses, explicitly accounting for heterogeneity in their activities and traits, and allow for a wide range of responses to tax, including avoidance margins. We model a rich set of policy instruments, including tax rates, bases and loans, accounting for how their interaction affects inter- and intra-temporal incentives. Increasing capital gains tax (CGT) rates on business owners raises revenue in a progressive manner and leads to a small drop in aggregate owner-managed business investment. There are large declines in investment for some high income incorporated businesses, because higher rates increase the cost of capital associated with new equity investments. Reforms to the tax base that remove the disincentive to inject equity are better targeted at investment than lower rates. In the UK setting, tax base reform combined with removing preferential CGT rates leads to higher tax revenue and investment.

(Kate Smith and Helen Miller)
Date: 13 May 2024, 15:00 (Monday, 4th week, Trinity 2024)
Venue: Saïd Business School, Park End Street OX1 1HP
Venue Details: Thatcher Business Education Centre (TBEC)
Speaker: Kate Smith (LSE)
Organising department: Saïd Business School
Organiser: Kristoffer Berg (Saïd Business School)
Part of: Oxford University Centre for Business Taxation Research Seminars
Booking required?: Required
Booking email: cbtevents@sbs.ox.ac.uk
Audience: Members of the University only
Editor: Alison Meeson