Scandinavian Working Papers in Economics
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2022/7: The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax
Elisa Casi (), Evelina Gavrilova (), David Murphy () and Floris Zoutman ()
Additional contact information
Elisa Casi: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Evelina Gavrilova: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
David Murphy: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Floris Zoutman: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Abstract: We study the effect of stricter enforcement of the dividend-withholding tax (DWT). We focus on a 2016 Danish enforcement reform and compare Denmark to its Nordic neighbors. Throughout Nordic stock markets, shares on loan spike sharply around dividend dates. These spikes are consistent with so-called cum-cum and cum-ex trading. Post reform, spikes in Denmark disappear, and annual DWT revenue increases by 130 percent. Enforcement does not harm the investment climate, as measured by Danish stock returns, investment rate, and dividend yield.
Keywords: Tax Enforcement; Dividend Tax; Security Lending; Economic Effects
JEL-codes: F23; G18; H26; K22; M21
Language: English
64 pages, First version: February 22, 2022. Revised: September 2, 2024.
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