Anticipating tax changes: evidence from the Finnish corporate income tax reform of 2005

1. Person: Kari, Seppo
Weitere Personen: Karikallio, Hanna; Pirttilä, Jukka
Format: Online-Artikel
Sprache: English
Veröffentlicht: Center for Economic Studies and Ifo Institute (CESifo) 2008
Serien: CESifo Working Paper
Schlagworte: Unternehmensbesteuerung
Corporate taxation
Tax reform
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Details: 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.

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