Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 1040: Firm-Level Responses to a Canceled Dividend Tax Increase

Johan Holmberg () and Håkan Selin ()
Additional contact information
Johan Holmberg: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Håkan Selin: Institute for Evaluation of Labour Market and Education Policy (IFAU) and UCFS

Abstract: Several papers examine how firms react to dividend tax reforms. But can tax reforms affect firm behavior without even occurring? An increase in the dividend tax on shares of Swedish closely-held corporations, scheduled for January 1, 2018, was canceled at short notice. In a difference-in-difference setting, we examine how firms reacted to the government’s announced reform plans. We find that dividend payments increased in the “pre-reform years” and declined sharply in 2018, especially for cash-rich firms. This led to a reduction in the cash holdings, with potential implications for firm activity.

Keywords: Owner level taxes; tax planning; investments

JEL-codes: G35; H32

Language: English

65 pages, October 30, 2025

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