No. 76: The big short (interest): Closing the loopholes in the dividend-withholding tax

Year: 2023
Type: Working Paper
Open Science:


We study the effect of stricter enforcement of the dividend-withholding tax (DWT). We focus on a 2016 Danish reform and compare Denmark to its Nordic neighbors. Before the reform, all countries have strong spikes in stocks on loan centered around the ex-dividend day, consistent with the most popular DWT arbitrage transactions. Post-reform, the spikes in Denmark disappear. We find that stricter enforcement resulted in approx. 1.3 bln USD in annual DWT revenue (130 % of pre-reform revenue) with no effect on cost of capital and dividend policy. We find similar results in reforms across Europe.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, Goethe University Frankfurt, University of Cologne and Leibniz University Hannover who share the same research agenda.

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