Department

School of Accountancy

Document Type

Article

Publication Date

1-1-2013

Abstract

Although much research on corporate dividend policy exists, the evidence is far from conclusive. Understanding how dividend taxes affect firm-level decisions is crucial to evaluating dividend imputation credits which provide shareholder-level tax credits for dividends received or decreased shareholder-level dividend tax rates, which reduce the double taxation of dividends. Using changes in New Zealand and Australia's tax regimes, this paper provides new insight into the corporate dividend policy views. The results support the double taxation and tax irrelevance corporate dividend policy views in dividend-paying firms operating in a tax regime with dividend imputation and capital gains taxes. By documenting a significant decrease in R&D investment and increase in dividend payment after a change in dividend taxes, this paper also highlights a void in the current corporate dividend policy views and demonstrates the need for the inclusion of R&D investment. In New Zealand and Australia, much of the increased dividend payment appears to have come from a decrease in R&D investment. Thus, if a country decides to decrease shareholder-level dividend taxes and the country values investment in R&D, it may need to consider simultaneously increasing the R&D investment incentive.

Journal

Journal of Economics and Economic Education Research

Journal ISSN

1533-3604

Volume

14

Issue

1

Included in

Accounting Commons

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