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The capital constraining effects of the norwegian wealth tax

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Abstract

This paper investigates if the Norwegian wealth tax imposes capital constraints on small privately held businesses. A panel of 31,428 Norwegian firms from 2005 to 2009 is used to estimate two models of capital constraints. The models are estimated using the Fixed Effects method. When firms are sorted a priori into two groups based on the wealth tax burden of the primary owner, the non-taxed firms are found to be slightly more constrained than the taxed firms, at a 10% and 5% confidence level depending on the model. Sorting based on the wealth tax is the most effective method of sorting firms into more or less constrained groups, while more traditional methods proved ineffective in this panel. The negative capital constraining effects of the wealth tax are therefore minimal; the tax affects only the private firms least reliant on internal financing

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  • Chris Edson, 2012. "The capital constraining effects of the norwegian wealth tax," Discussion Papers 724, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:724
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp724.pdf
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    References listed on IDEAS

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    1. Isabelle Joumard, 2003. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
    2. Caggese, Andrea, 2007. "Testing financing constraints on firm investment using variable capital," Journal of Financial Economics, Elsevier, vol. 86(3), pages 683-723, December.
    3. Annette Alstadsæter & Erik Fjærli, 2009. "Neutral taxation of shareholder income? Corporate responses to an announced dividend tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 571-604, August.
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    More about this item

    Keywords

    Wealth Tax; Norway; Capital Constraints;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • G3 - Financial Economics - - Corporate Finance and Governance

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