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Taxing share repurchases

Author

Listed:
  • Dayanandan, Ajit
  • Donker, Han
  • Nofsinger, John

Abstract

The US Inflation Reduction Act of 2022 imposed a 1% excise tax on share repurchases. We can learn from corporate reaction to such a new policy in India. The Indian federal government recently levied a 20 percent tax, plus surcharge, on share repurchases. We show that companies did not slow down their share repurchase initiation. However, to offset the added taxes, they increased their capital investment. The combination of the share repurchase and capital investment decreased their free cash flow.

Suggested Citation

  • Dayanandan, Ajit & Donker, Han & Nofsinger, John, 2022. "Taxing share repurchases," Economics Letters, Elsevier, vol. 221(C).
    • Handle: RePEc:eee:ecolet:v:221:y:2022:i:c:s0165176522003536
    DOI: 10.1016/j.econlet.2022.110879
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    References listed on IDEAS

    as
    1. Gyimah, Daniel & Siganos, Antonios & Veld, Chris, 2021. "Effects of financial constraints and product market competition on share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
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    Full references (including those not matched with items on IDEAS)

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