Corporate Taxes, Leverage, and Investment: Evidence from Nazi-Occupied Netherlands

This data deposit provides the data and replication files for Fliers et al. (2024, forthcoming in The Economic History Review).

We examine the Netherlands around the Second World War, where the occupying Nazi regime overhauled the country’s corporate tax regime and introduced a profit tax of 55 percent. We estimate that the new tax regime cost investors at least 300 million guilders, an amount equivalent to five percent of Dutch GDP in 1940. We demonstrate that the tax introduction changed the financing of Dutch businesses. In particular, we find strong evidence that debt financing increased because it provides a tax shelter. The changes in taxation also led to an after-tax reduction in the cost of debt, which had large real effects on firm investment: after the end of the war, firms with more leverage had higher capital expenditures.