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Does Lowering Dividend Tax Rates IncreaseDividends Repatriated? Evidence of Intrafirm Cross-Border Dividend Repatriation Policiesby German Multinational Enterprises

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  • Christian Bellak
  • Markus Leibrecht

Abstract

This paper explores the effect dividend taxes exert on dividends repatriated from foreign affiliates to their German parent companies. The empirical analysis based on firm-level data from the Microdatabase Direct Investment provided by the Deutsche Bundesbank first signals the validity of the original Lintner model for cross-border intrafirm dividend payments of German affiliates abroad. Second, results imply that high dividend taxes indeed have a statistically significant negative effect on dividends repatriated. Our calculations suggest that a one-percentage-point decrease in the dividend tax rate would increase dividends repatriated by about 3.75%. Evaluated at the mean of positive dividend payments, a semielasticity of -1.71 is derived.

Suggested Citation

  • Christian Bellak & Markus Leibrecht, 2010. "Does Lowering Dividend Tax Rates IncreaseDividends Repatriated? Evidence of Intrafirm Cross-Border Dividend Repatriation Policiesby German Multinational Enterprises," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(4), pages 350-383, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201012)66:4_350:dldtri_2.0.tx_2-s
    DOI: 10.1628/001522108X540847
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    Cited by:

    1. Timothy Goodspeed & Jorge Martinez-Vazquez & Li Zhang, 2011. "Public Policies and FDI Location: Differences between Developing and Developed Countries," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(2), pages 171-191, June.
    2. Jarkko Harju & Seppo Kari, 2017. "Dividend Taxes and Decisions of MNEs: Evidence from a Finnish Tax Reform," CESifo Economic Studies, CESifo Group, vol. 63(1), pages 45-77.
    3. Eduardo C. Oliveira & Michele N. Juca, 2021. "Multinational Dividend Policies: A Systematic Literature Review to Future," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 442-465.
    4. M. Jonathan C. Eklund, 2022. "Do multinational firms respond to personal dividend income tax rates?," Empirical Economics, Springer, vol. 62(4), pages 1743-1771, April.
    5. Padilla, Ramón & Gomes Nogueira, Caroline, 2015. "Determinants and home-country effects of FDI outflows: Evidence from Latin American countries," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 38914, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Harendt, Christoph & Dreßler, Daniel & Overesch, Michael, 2016. "The Impact of Tax Treaties and Repatriation Taxes on FDI Revisited," VfS Annual Conference 2016 (Augsburg): Demographic Change 145588, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    dividend policy; taxes; Lintner model; multinational enterprise;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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