Estimating the impacts of payroll taxes: Evidence from Canadian employer–employee tax data

Abstract

Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

The taxation of labour vs. capital income

“…The largest gaps are in Greece and Latvia, primarily reflecting differences in ETRs at the personal level. 26 The integrated ETRs are similar or identical in countries like Australia, Canada, and New Zealand, which have dividend imputation systems. On the other hand, the integrated ETR for dividend income is significantly higher than for wage income in Colombia, but is also somewhat higher in Switzerland and Korea.…”

“…Therefore, at high income levels, integrating firm-level taxes shows that wage income is taxed preferentially compared to dividend income in these countries. 26 These personal-level features include lower tax rates on dividend income than on wage income, or SSCs not being payable on dividend income, as outlined in Section 5.2. It should be noted that SSCs can confer entitlement to social benefits (e.g.…”

“…Recent empirical research has also shown that high income earners face effective tax rates that are lower than the top statutory tax rates (e.g. Congressional Budget Office (2021 [26]), Advani and Summers (2020 [23]), and Bach, Corneo and Steiner (2012 [27])). Findings such as these, coupled with the high levels of income inequality in the OECD, have contributed to interest in the differential tax treatment of labour and capital income.…”

Tax compliance and firm response to electronic sales monitoring

“…For instance, property taxes are levied on the value of the land they occupy and the buildings in which they operate, payroll taxes are levied on wages paid and corporate income taxes are levied on their profits. All these taxes affect firm behaviour: property taxes affect firm location (Allee et al 2015, Mast 2020); payroll taxes affect total labour demand (Saez et al 2019) without affecting after‐tax wages (Saez et al 2019, Deslauriers et al 2021); corporate taxes affect the firms' cost of capital (Modigliani and Miller 1958), leverage (Faulkender and Smith 2016), risk aversion (Smith and Stulz 1985, Mukherjee et al 2017), capital expenditure (Graham et al 2017) and innovation (Mukherjee et al 2017). Hanlon and Heitzman (2010) even conclude that taxes affect not only investment and financing policy but also organizational form, transfer pricing, mergers and compensation decisions.…”

Revue de littérature sur l’incidence fiscale des taxes sur les entreprises

“…Toujours dans le contexte français,Cahuc et al (2019) étudient l'effet d'une exemption temporaire de cotisations sociales sur les bas salaires octroyée aux entreprises de moins de 10 salariés durant la crise de 2008. Les auteurs montrent que cette exemption n'a eu aucun impact sur les salaires et a donc réduit le coût du travail pour les entreprises ciblées.Pour le Canada,Deslauriers et al (2018) étudient l'effet des taxes sur la masse salariale qui sont de « pures » taxes et non des cotisations, et qui n'ouvrent donc pas droit à des prestations futures. Ce type de taxe est peu commun à travers le monde, mais plusieurs provinces canadiennes dont le Québec et l'Ontario ont adopté ce type d'imposition qui représente de 7% à 21% des recettes fiscales des provinces liées à la taxation des entreprises.8 Deslauriers et al (2018) utilisent des données appariées entreprises-travailleurs qui leur permettent de suivre les salaires des travailleurs canadiens.…”