 Anticipating Tax Changes: Evidence from the Finnish Corporate Income Tax Reform of 2005 (Updated version VATT Discussion papers 447)Seppo Kari, Hanna Karikallio and Jukka Pirttilä No 426, Discussion Papers from VATT Institute for Economic Research Abstract: Using register-based panel data covering all Finnish firms in 1999–2004, we examine how corporations anticipated the 2005 dividend tax increase via changes in their dividend and investment policies. The Finnish capital and corporate income tax reform of 2005 creates a useful opportunity to measure this behaviour, since it involves exogenous variation in the tax treatment of different types of firms. The estimation results reveal that those firms that anticipated a dividend tax hike increased their dividend payouts by 20–50 per cent. This increase was not accompanied by a reduction in investment activities, but rather was associated with increased indebtedness in non-listed firms. The results also suggest that the timing of dividend distributions probably offset much of the potential for increased dividend tax revenue following the reform. Keywords: Corporate income taxation; dividends; tax reform; anticipation effects; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot; H250 - Business Taxes and Subsidies including sales and value-added (VAT); H320 - Fiscal Policies and Behavior of Economic Agents: Firm (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fer:dpaper:426 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Discussion Papers from VATT Institute for Economic Research Contact information at EDIRC. |
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