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The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax

Author

Listed:
  • Casi, Elisa

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Gavrilova, Evelina

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Murphy, David

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Zoutman, Floris

    (Dept. of Business and Management Science, Norwegian School of Economics)

Abstract

We study the effect of stricter enforcement of the dividend-withholding tax (DWT). We focus on a 2016 Danish enforcement reform and compare Denmark to its Nordic neighbors. Throughout Nordic stock markets, shares on loan spike sharply around dividend dates. These spikes are consistent with so-called cum-cum and cum-ex trading. Post reform, spikes in Denmark disappear, and annual DWT revenue increases by 130 percent. Enforcement does not harm the investment climate, as measured by Danish stock returns, investment rate, and dividend yield.

Suggested Citation

  • Casi, Elisa & Gavrilova, Evelina & Murphy, David & Zoutman, Floris, 2022. "The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax," Discussion Papers 2022/7, Norwegian School of Economics, Department of Business and Management Science, revised 02 Sep 2024.
    • Handle: RePEc:hhs:nhhfms:2022_007
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    More about this item

    Keywords

    Tax Enforcement; Dividend Tax; Security Lending; Economic Effects;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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