Tax planning and investment responses to dividend taxation

Aliisa Koivisto ()
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Aliisa Koivisto: Finnish Centre of Excellence in Tax Systems Research, VATT Institute for Economic Research

No 15, Working Papers from Finnish Centre of Excellence in Tax Systems Research

Abstract: This study explores empirically how business owners respond to dividend taxes in a range of diferent margins including tax planning and investment. Using administrative tax data on all privately held Finnish corporations, I fnd exceptionally clear dividend payment responses to tax rate discontinuities and changes. Heterogeneity analysis suggests that more experienced owners and owners with lower income have higher tax base elasticities. Studying the income composition of owners around tax changes reveals clear income shifting between wage and dividends with negligible efect on gross income received from the frm. Evidence on the asset composition of frms indicates that a notable part of the payment response is due to inter-temporal income-smoothing, while changes in the tax schedule did not cause signifcant real responses in output or investment.

Keywords: Dividend taxation; investment; income shifting; bunching (search for similar items in EconPapers)
JEL-codes: G38 H21 H24 H25 (search for similar items in EconPapers)
Pages: 50
Date: 2023-09
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-pbe and nep-pub
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Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research

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