Does lowering dividend tax rates increasedividends repatriated? Evidence of intra-firmcross-border dividend repatriation policiesby German multinational enterprises

This paper explores the impact dividend taxes exert on the dividendsrepatriated from foreign affiliates to their German parent company.Based on an augmented Lintner model of rms' dividend payoutdecisions, the paper focusses on cross-border intra-rm dividend paymentsof wholly-owned foreign affiliates in the manufacturing sector.Firm-level data from the Microdatabase Direct Investment (MiDi) ofthe Deutsche Bundesbank is used. Results rstly signal the validityof the original Lintner model for cross-border intra-rm dividend paymentsof German affiliates abroad, although the target payout ratioand the degree of dividend smoothing drops substantially once timeinvariantunobserved heterogeneity is controlled for. Secondly, resultsfrom an augmented Lintner model imply that increases in dividendtaxes indeed have a statistically signicant negative impact on the expectedvalue of dividends repatriated: Evaluated at the overall meandividend payment a one percentage point increase in the dividend taxrate would decrease dividends repatriated by about 3.5 percent. Evaluatedat the mean of positive dividend payments a semi-elasticity of-1.6 is derived.[...] Christian Bellak, Markus Leibrecht, Michael Wild