Taxes and Business Philanthropy in Armenia

32 Pages Posted: 18 Mar 2021

See all articles by Zareh Asatryan

Zareh Asatryan

ZEW – Leibniz Centre for European Economic Research

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

Date Written: February 1, 2021

Abstract

The majority of countries around the world provide tax incentives for business philanthropy. However, little is known about the responsiveness of businesses to this tax treatment. This paper expands on this scant literature by focusing on the Armenian tax system which provides incentives for business philanthropy. The support takes the form of a deduction capped at a fraction of business receipts. This generates a kink beyond which the marginal tax subsidy drops to zero. Using administrative panel data for the years 2007 through 2017, we find strong evidence of bunching by Armenian firms at the kink, with a sizeable tax elasticity of giving at the intensive margin. The evidence on bunching is robust to whether firms have been audited, and to whether any tax deficiencies are observed. This suggests that the observed response is likely to be real rather than being driven by reporting responses.

Keywords: Business philanthropy, charitable giving, corporate income taxes, firm behavior, bunching, tax-price elasticity.

JEL Classification: H25, H32, M14

Suggested Citation

Asatryan, Zareh and Joulfaian, David, Taxes and Business Philanthropy in Armenia (February 1, 2021). ZEW - Centre for European Economic Research Discussion Paper No. 21-022, Available at SSRN: https://ssrn.com/abstract=3805616 or http://dx.doi.org/10.2139/ssrn.3805616

Zareh Asatryan (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

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