Using register-based panel data covering all Finnish firms in 1999?2004, we examine how corporations anticipated the 2005 dividend tax increase via changes in their dividend and investment policies. The Finnish capital and corporate income tax reform of 2005 creates a useful opportunity to measure this behaviour, since it involves exogenous vexamine how corporations anticipated the 2005 dividend tax increase via changes in their dividend and investment policies. The Finnish capital and corporate income tax reform of 2005 creates a useful opportunity to measure this behaviour, since it involves exogenous variation in the tax treatment of different types of firms. The estimation results reveal that those firms that anticipated a dividend tax hike increased their dividend payouts in a statistically significant way. This increase was not accompanied by a reduction in investment activities, but rather was associated with increased indebtedness in non-listed firms. The results also suggest that the timing of dividend distributions probably offsets much of the potential for increased dividend tax revenue following the reform. JEL Classification: H25, H32
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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number
447.
Length: Date of creation: 02 Jul 2008 Date of revision: Handle: RePEc:fer:dpaper:447
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Roger Gordon & Martin Dietz, 2006.
"Dividends and Taxes,"
NBER Working Papers
12292, National Bureau of Economic Research, Inc.
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