Monday, November 4, 2019
Adrien Matray (Princeton) presents Higher Dividend Taxes, No Problem! Evidence From Taxing Entrepreneurs in France (with Charles Boissel (HEC Paris)) at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:
We exploit a large increase in the dividend tax rate in France that affected three-quarter of firms to estimate the effect of dividend taxation on corporate policies. Using administrative data covering the universe of firms and employees, we find in a differences-in-differences setting that affected firms swiftly cut dividends, both at the extensive and intensive margin, with an implied elasticity of around -0.5. Part of the resulting cash retention is used to increase investment and employment, with a positive elasticity around +0.30. The rest is accumulated as liquidity and used to extend credit to customers. Newly-taxed entrepreneurs do not appear to engage in income shifting to evade tax increase.
Effect of Tax Reform on Dividend Payment
The figure shows the evolution of the probability for a firm to pay dividend (in percentage) and the bottom figure shows the evolution of the ratio dividend over asset in 2011 (in percentage). “Treated” firms are firms affected by the 2013 tax reform on dividend payment (SARL) and “Control” firms are firms not affected (SA–SAS)