American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax
American Economic Journal: Economic Policy
(pp. 275–308)
Abstract
We study the effect of stricter enforcement of the dividend-withholding tax (DWT). We focus on a 2016 Danish enforcement reform and compare Denmark to its Nordic neighbors. Throughout the Nordic stock markets, shares on loan spike sharply around dividend dates. These spikes are consistent with abuse of the DWT system. Postreform, spikes in Denmark disappear, and annual DWT revenue increases by 130 percent. Enforcement does not harm the investment climate as measured by Danish stock returns, investment rate, and dividend yield.Citation
Casi, Elisa, Evelina Gavrilova, David Murphy, and Floris T. Zoutman. 2026. "The Big Short (Interest): Closing the Loopholes in the Dividend-Withholding Tax." American Economic Journal: Economic Policy 18 (2): 275–308. DOI: 10.1257/pol.20230547Additional Materials
JEL Classification
- G18 General Financial Markets: Government Policy and Regulation
- G35 Payout Policy
- G38 Corporate Finance and Governance: Government Policy and Regulation
- H26 Tax Evasion and Avoidance
- K22 Business and Securities Law
- K34 Tax Law