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

Niku Määttänen and Olli Ropponen

No 40, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: 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.

Keywords: Dividend taxation; Non-listed companies; Firm investment (search for similar items in EconPapers)
JEL-codes: D92 G35 H24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-12-09
New Economics Papers: this item is included in nep-acc and nep-pub
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