Anticipating Tax Change: Evidence from the Finnish Corporate Income Tax Reform of 2005
Seppo Kari,
Hanna Karikallio and
Jukka Pirttilä
No 2201, CESifo Working Paper Series from CESifo
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 10-50 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 offsets much of the potential for increased dividend tax revenue following the reform.
Keywords: corporate income taxation; dividends; tax reform; anticipation effects (search for similar items in EconPapers)
JEL-codes: H25 H32 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (13)
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Journal Article: Anticipating Tax Changes: Evidence from the Finnish Corporate Income Tax Reform of 2005* (2008)
Working Paper: Anticipating Tax Changes: Evidence from the Finnish Corporate Income Tax Reform of 2005 (2008) 
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2201
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