Taxation, Profit Distribution and Investment of Non-listed Companies in Finland

Abstract

This paper studies the taxation of non-listed companies and their owners in Finland. We first describe the main features of the Finnish tax system regarding the taxation of dividends from non-listed companies. We use firm-level data to illustrate how the tax incentives are reflected in firms’ profit distribution policies. We then build a dynamic investment model that features the main characteristics of the Finnish dividend taxation. In the model, entrepreneurs face a borrowing constraint and have a consumption smoothing motive. We use the model to investigate how the current dividend taxation affects the investment incentives. The results illustrate how the current dividend taxation in certain cases distorts firms’ investment decisions.

Information om publikationen

Serie
ETLA Raportit - Reports 40
Datum
09.12.2014
Nyckelord
Dividend taxation, Non-listed companies, Firm investment
ISSN
2323-2447, 2323-2455 (Pdf)
JEL
D92, G35, H24
Sidor
28
Språk
Finska