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Taxes and company dividends: a micro-econometric investigation exploiting cross-section variation

Author

Listed:
  • Stephen Bond

    (Institute for Fiscal Studies and Nuffield College, Oxford)

  • Lucy Chennells

    (Institute for Fiscal Studies)

  • Michael Devereux

    (Institute for Fiscal Studies and University of Oxford)

Abstract

Double taxation of company dividends is reduced in the UK by a partial imputation system of corporation tax, which was introduced in 1973. Payments of advance corporation tax (ACT) charged on dividend distributions can normally be offset against the firm's corporation tax liability. However, for companies with surplus advance corporation tax, this ACT setoff is deferred and its value is reduced by discounting. Firms in a surplus ACT position face a higher tax cost of paying dividends than firms without surplus ACT.

Suggested Citation

  • Stephen Bond & Lucy Chennells & Michael Devereux, 1995. "Taxes and company dividends: a micro-econometric investigation exploiting cross-section variation," IFS Working Papers W95/11, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:95/11
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    Cited by:

    1. Steve Bond & Lucy Chennells & Michael Devereux, 1995. "Company dividends and taxes in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 1-18, August.

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