Dividend taxation of non-listed companies, resource allocation and productivity

Abstract
We consider the taxation of non-listed companies and their owners in Finland. We analyse how the current highly non-linear dividend taxation influences the allocation of labour and capital across different firms, average labour productivity and the equilibrium wage level. To this end, we use a general equilibrium model of firm investment where firms may have different production technologies. We find that the current tax system is likely to distort resource allocation compared to linear dividend taxation. This works to lower the average labour productivity as well as the general wage level.

JEL: D92, G35, H24
Date: 26.08.2016
Pages: 16
Price: 15 €
Language: Finnish
ISSN: 2323-2447
2323-2455 (Pdf)
ETLA Raportit – Reports 56