Direct Evidence of Dividend Tax Clienteles

Magnus Dahlquist, Göran Robertsson and Kristian Rydqvist

No 6005, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these portfolios 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 closely-held corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

Keywords: capital gains tax; dividend tax clienteles; stock ownership; Tax incidence (search for similar items in EconPapers)
JEL-codes: G11 G35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-cfn
Date: Written
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