Journal article

Taxes and the Choice of Organizational Form in Late Nineteenth Century Japan

Kazuki Onji, John P Tang

The Journal of Economic History | Cambridge University Press (CUP) | Published : 2017


How do changes to taxation policy affect the organizational choices of firms? Using historical firm data constructed from Japanese corporate genealogies, we examine the short-run impact of introducing a personal income tax (PIT) in 1887 on tax-motivated incorporation. Between 1880 and 1892, we find that the introduction of PIT increased the share of incorporated firms by more than 3 percentage points, indicating firms chose their organizational structure to avoid new taxation. Furthermore, our results suggest that a corporate income tax may have acted as a backstop to maintain revenue collected through PIT.

University of Melbourne Researchers



Awarded by Australian Research Council

Funding Acknowledgements

Thanks to Paul Rhode, William Collins, Li Liu, two anonymous referees, and seminar participants at ANU(RSE), AJRC, UCL(CORE), NTA 2015 for comments and suggestions that significantly improved this paper. Onji has received funding for this research from the GSE, Osaka University and MEXT/JSPS KAKENHI Grant Number 15K03510. Tang has received funding for this research from the Australian Research Council (DE120101426). The authors would like to thank Jun Imaki and Koji Asano for helpful research assistance and translation support. A previous version of this paper was circulated under the title A nation without a corporate income tax: Evidence from nineteenth century Japan. All remaining errors are ours.