Report
Patrick Artus

What have companies in OECD countries done with the reduction in taxes and in interest payments?

Since the 2008 crisis, and before the coronavirus crisis, companies in OECD countries benefited both from a reduction in the tax burden they paid and from lower interest payments on their debt. What did they do with these unexpected funds? At first sight, they may have used them to: Deleverage; Invest; Make acquisitions or hold cash; Remunerate shareholders (in dividends or share buybacks); Pay the ir employees. It can be seen that the lower taxes and interest payments seem to have been used only to finance acquisitions and increased cash holdings, and not for deleveraging, investment, wage increases or shareholder remuneration. If tax rates are no longer reduced and interest rates go up, what will companies do if they do not want to affect investment, wages or shareholder remuneration? There would be a reduction in acquisitions and cash holdings.  It is interesting to see that, contrary to popular belief, it is not the remuneration of shareholders that has benefited from the increase in profits.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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