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Firm-level responses to a canceled dividend tax increase

Author

Listed:
  • Holmberg, Johan

    (Department of Economics at Umea School of Business, Economics and Statistics, and Uppsala Center for Fiscal Studies (UCFS))

  • Selin, Håkan

    (Institute for Evaluation of Labour Market and Education Policy (IFAU) and UCFS)

Abstract

An increase in the dividend tax on shares of Swedish closely-held corporations, scheduled for January 1, 2018, was canceled at short notice. In a difference-in-difference setting, we examine how firms reacted to the canceled reform. We find that dividends payments increased in 2016 and 2017 and declined sharply in 2018, especially for cash-rich firms. However, cash holdings recovered quickly in 2018 and 2019, and the excessive dividend payouts did not affect investments. Paradoxically, the discontinued reform implied an additional tax burden for those engaged in intertemporal tax arbitrage.

Suggested Citation

  • Holmberg, Johan & Selin, Håkan, 2025. "Firm-level responses to a canceled dividend tax increase," Working Paper Series 2025:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2025_003
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    More about this item

    Keywords

    Owner level taxes; tax planning; investments; employment;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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