Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129642
Authors: 
Dackehag, Margareta
Hansson, Åsa
Year of Publication: 
2015
Series/Report no.: 
IFN Working Paper 1081
Abstract: 
More recently researchers have turned to analyze how the tax structure, rather than the overall tax level, affects economic performance. For instance, several papers have investigated how taxation on corporate and individual (labor) income influences growth. Taxation of dividend income may also influence growth via its impact on investments and firm behavior. Within the academic community there is conflicting views about the impact taxation of dividends has on firm behavior and, hence, on economic performance. According to the "traditional view", taxation of dividends is distortionary and increases the cost of equity. According to the "new view", taxation of dividends does not influence the marginal cost of capital and consequently has no impact on investment decisions. To our knowledge, this paper is the first study to explore how tax rates on dividends affect economic growth, by using panel data from 1990 till 2008 for 18 European countries. We find that taxation of dividend income negatively influences economic growth, a result that corroborates the old view of dividends taxation as distortionary and also has some policy implication for the European countries in question.
Subjects: 
Economic growth
taxation of corporate income
taxation of personal income
JEL: 
H21
H24
H25
O40
Document Type: 
Working Paper

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