The Impact Of Dividend Tax Rate Differences On Corporate Payout Behaviors

In 2012, the SRC issued a new cash dividend tax policy, it prescribed that, investors can enjoy different tax rates according to their holding period:those whose holding period is less than one month(including one month)will enjoy a tax rate of 20%;those whose holding period is between one month and one year(including one year) will enjoy a tax rate of 10%;those whose holding period is more than one year will enjoy a tax rate of 5%.The reason of its enactment is that in Chinese stock market, the excessive speculation behavior is very popular and it’s also very common that companies only value financing instead of returning.It hinders stock market’s healthy development. To encourage investors to have a long-term investment and improve the stability of market, the SRC issued this policy. It provides us a good condition to study the impact of dividend tax rate differences on companies’ payout policy.According to relevant dividend view, dividend policy is a vital policy among all a company’s financial problem. When a company attains some cash due to some business activity, then it will face such a question:should she invest these cash into operation, or distribute them to investors? On one hand, this decision concerns company’s development; On the other hand,it concerns investors’benefits. To a company, how to distribute its net profit is an important decision, because investors will make their own judgement regarding the company’s actual operating conditions. Then, they will make their own investment decisions.As one of the three most important financial decisions of a corporate, dividend payout policy has always been a very important issue. There are a lot of scholars regard dividend payout policy as his target. But due to the previous policy, all the investors shoulder the same tax rate, which can not provide us conditions we need. However, as the new policy’s enactment, it give us a good opportunity to study it.With the development and perfection of stock market, cash dividend occupys a high proportion in all the dividend policies and now it’s the major dividend policy. This paper carries out research due to connecting theory study with empirical study.This paper can be divided into five parts:in part one, we have stated topic basis and its meaning, at the same time, we raised some questions. In part two, we have stated a lot of relative literature. In part three, we have stated several classic dividend theory and analysed the changing policies, then we raised our research hypothesis. In part four, we did empirical study and tested hypothesis. In part five, we raised our conclusions, suggestions, innovation points and insufficient aspects.Through studying the impact of tax rate difference on company’s dividend policy we find that the new policy does affect company’s dividend payout behaviors and investors will prefer cash dividend compared with before. At the same time, companies will increase their cash dividend. Also, holding-time will enhance the impact of tax rate differences. In addition, we also conclude that the property of company can influence the impact of tax rate differences on company’s dividend payout behaviors. Compared with state-owned companies, non-state-owned companies’ dividend payout behaviors are more likely affected by tax rate differences. According to the conclusions, I suggest that income tax policy should be adjusted to develop the function of taxation. Public companies should enhance their sense of study to return their stockholders. The SRC can take advantage of this policy to control companies’ dividend payout behaviors and investors’ investment behaviors. And tax rate can be decreased to encourage investors to invest again. Our government should modify the methods of how to affirm and measure income tax.