IMPACT OF TAXES ON DIVIDENDS ON FINANCIAL DECISIONS Cover Image

IMPACTUL IMPOZITELOR PE DIVIDEND ASUPRA DECIZIILOR FINANCIARE
IMPACT OF TAXES ON DIVIDENDS ON FINANCIAL DECISIONS

Author(s): Mihaela Diaconu
Subject(s): Economy
Published by: Editura Universităţii Vasile Goldiş
Keywords: dividend taxation; capital gains taxation; „old view” of dividend taxation; „new” view of dividend taxation; investments neoclassical model

Summary/Abstract: The paper highlights the impact of dividend taxes on the firm’s investment decisions, based on the analytical framework of the „new” view and „traditional” view of dividend taxation. Using the neoclassical model of investment we find that the firm will be affected by increasing the dividend tax rate if it pursues investment financed by issuing shares. This impact is due to increased gross rate of return necessary to achieve the company’s investment. Conversely, if we consider the use of undistributed profits as a means of financing, dividend tax does not predict the impact on investment decisions. In this case, the capital gain taxes are relevant in the investment decisions due the impact on gross rate of return. In the same time, the two types of taxes dimensions guide, also the financing decision of the company. These conclusions are formulated considering the classical dividend tax system practiced yet in Romania.

  • Issue Year: 21/2011
  • Issue No: 2
  • Page Range: 406-416
  • Page Count: 11
  • Language: Romanian
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