Firm-level responses to a canceled dividend tax increase

Johan Holmberg () and Håkan Selin
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Johan Holmberg: Department of Economics at Umea School of Business, Economics and Statistics, and Uppsala Center for Fiscal Studies (UCFS)

No 2025:3, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: An increase in the dividend tax on shares of Swedish closely-held corporations, scheduled for January 1, 2018, was canceled at short notice. In a difference-in-difference setting, we examine how firms reacted to the canceled reform. We find that dividends payments increased in 2016 and 2017 and declined sharply in 2018, especially for cash-rich firms. However, cash holdings recovered quickly in 2018 and 2019, and the excessive dividend payouts did not affect investments. Paradoxically, the discontinued reform implied an additional tax burden for those engaged in intertemporal tax arbitrage.

Keywords: Owner level taxes; tax planning; investments; employment (search for similar items in EconPapers)
JEL-codes: G35 H32 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2025-04-08
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:ifauwp:2025_003

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