Dividend Taxes and Decisions of MNEs: Evidence from a Finnish Tax Reform

Arbeitspapier

In this study we explore how a firm-level dividend tax on redistributed foreign profits affects the financial decisions of a multinational enterprise (MNE). We examine this by using evidence from a recent tax reform in Finland. The so-called equalization tax (EQT) used to be a regular element of European imputation systems, designed to ensure that dividends were not paid out of untaxed profits. Theoretical analyses have suggested that EQT may distort several financial decisions of MNEs. We find a 23 percent increase in dividend payments and a similar increase in repatriated foreign profits after the repeal of EQT among Finnish MNEs. We also find evidence that the reported profits increased among foreign subsidiaries of Finnish MNEs, which indicates an effect on profit-shifting. No change in investment was detected.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5606

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Multinational Firms; International Business ; Fiscal Policies and Behavior of Economic Agents: Firm
• Subject: taxation ; multinational firms ; firm behavior

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Harju, Jarkko ; Kari, Seppo
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/123248
• Last update: 10.03.2025, 11:44 AM CET