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Taxation, Profit Distribution and Investment of Non-listed Companies in Finland


  • Määttänen, Niku
  • Ropponen, Olli


Abstract This paper studies the taxation of non-listed companies and their owners in Finland. We first describe the main features of the Finnish tax system regarding the taxation of dividends from non-listed companies. We use firm-level data to illustrate how the tax incentives are reflected in firms’ profit distribution policies. We then build a dynamic investment model that features the main characteristics of the Finnish dividend taxation. In the model, entrepreneurs face a borrowing constraint and have a consumption smoothing motive. We use the model to investigate how the current dividend taxation affects the investment incentives. The results illustrate how the current dividend taxation in certain cases distorts firms’ investment decisions.

Suggested Citation

  • Määttänen, Niku & Ropponen, Olli, 2014. "Taxation, Profit Distribution and Investment of Non-listed Companies in Finland," ETLA Reports 40, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:report:40

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    Dividend taxation; Non-listed companies; Firm investment;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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