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Direct Evidence of Dividend Tax Clienteles

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    We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these port-folios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by private corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

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    Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 51.

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    Length: 34 pages
    Date of creation: 15 Mar 2007
    Date of revision:
    Handle: RePEc:hhs:sifrwp:0051
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    20. Randall Morck, 2004. "How to Eliminate Pyramidal Business Groups - The Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy," NBER Working Papers 10944, National Bureau of Economic Research, Inc.
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