Direct Evidence of Dividend Tax Clienteles

36 Pages Posted: 11 Apr 2007

See all articles by Magnus Dahlquist

Magnus Dahlquist

Stockholm School of Economics; Swedish House of Finance

Göran Robertsson

Swedish House of Finance at Stockholm School of Economics

Kristian Rydqvist

State University of New York at Binghamton - School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2006

Abstract

We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these portfolios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by closely-held corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.

Keywords: Capital gains tax, dividend tax clienteles, stock ownership, tax incidence

JEL Classification: G11, G35

Suggested Citation

Dahlquist, Magnus and Robertsson, Göran and Rydqvist, Kristian, Direct Evidence of Dividend Tax Clienteles (December 2006). CEPR Discussion Paper No. 6005, Available at SSRN: https://ssrn.com/abstract=979847

Magnus Dahlquist (Contact Author)

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Göran Robertsson

Swedish House of Finance at Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, 3 111 60
Sweden
0708993810 (Phone)
167 65 (Fax)

Kristian Rydqvist

State University of New York at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States
607-777-2673 (Phone)
607-777-4422 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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