The Effects of Capital Income Taxation on Consumption : Panel data analysis of the OECD countries

Abstract: This thesis investigates if the tax rate on dividend income has a significant effect on private consumption expenditure. This is done through a panel study on 36 OECD countries during the period 2000-2019. Regressions using differenced data and several control variables are used. The results are to some extent in line with previous empirical work studying the effects of tax changes on consumption. The results indicate that the taxation of capital income in the form of the overall tax rate on dividend income does not have a significant effect on private consumption expenditure. The theoretical mechanism deemed most likely to be in effect is tax planning since contradictory results are obtained regarding the effects of other tax rates in the form of taxes on labour income and VAT on private consumption expenditure.