Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123248
Authors: 
Harju, Jarkko
Kari, Seppo
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5606
Abstract: 
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.
Subjects: 
taxation
multinational firms
firm behavior
JEL: 
H25
F23
H32
Document Type: 
Working Paper

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