The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax

Elisa Casi, Evelina Gavrilova, David Murphy and Floris T. Zoutman

American Economic Journal: Economic Policy, 2026, vol. 18, issue 2, 275-308

Abstract: We study the effect of stricter enforcement of the dividend-withholding tax (DWT). We focus on a 2016 Danish enforcement reform and compare Denmark to its Nordic neighbors. Throughout the Nordic stock markets, shares on loan spike sharply around dividend dates. These spikes are consistent with abuse of the DWT system. Postreform, spikes in Denmark disappear, and annual DWT revenue increases by 130 percent. Enforcement does not harm the investment climate as measured by Danish stock returns, investment rate, and dividend yield.

JEL-codes: G18 G35 G38 H26 K22 K34 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/pol.20230547

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