Description

This paper assesses the effects of distributed-profit tax regimes on firm investment, focusing on Estonia's 2000 reform and Latvia's 2018 reform. Using firm-level ORBIS data and a difference-in-differences (DiD) framework with event-study extensions, the analysis examines investment rates relative to a control group of firms in Finland. The results suggest no sustained increase in investment rates for Estonian firms after the 2000 reform, and on average a decline in investment rates for Latvian firms following their 2018 CIT reform. Overall, the findings suggest that distributed-profit taxation does not automatically raise investment rates for all firms and that outcomes may depend on firm heterogeneity and complementary policies.

More publications in this series: Selected Issues Papers