D22 - Firm Behavior: Empirical AnalysisReturn

Catastrophic risks have in recent years brought with them big question marks overwhat attitude insurers should take towards them. This is particularly a problem insituations of recurrent hurricane-type catastrophes on the east coast of the Caribbeanand the United States, where it is already perfectly legitimate to address the fulfilmentof the contingency condition, which is an essential condition for the recognition ofan insurance claim. The solution, beyond the limits and exclusions imposed onclaims, appears to be to involve markets outside the insurance industry and transferrisk, for example, through catastrophe.

The Czech Republic has implemented the Directive on the common system of parent and subsidiary companies taxation as amended by Council Directive 2006/98/EC. Based on this, the profits paid to parent companies are exempt from withholding tax. All EU Member States are required to implement this Directive. However, a number of states have supplemented their legislation with rules designed to prevent tax evasion. On the contrary, since 2014, the Czech Republic has simplified the rules on commercial law for the payment of equity and has extended the possibilities for payment of dividends since 2018. The empirical research was focused on the exploration of the largest Czech companies and their profits paid out, i.e. on how much of the generated profits are paid to parent companies abroad. The selected sample included 56 companies from the CZECH TOP 100 ranking, 31 joint- stock companies (55%) and 25 limited liability companies. All these companies paid dividends in the years 2013 to 2015. Banks and financial institutions were not in the survey. It was found that 16 out of 31 joint-stock companies paid dividends each year at the amount close to the entire reported profit for the prior period. The same policy was followed by 9 out of 21 limited liability companies. More than 99% of the earnings paid was exempt from withholding tax on the basis of the implementation of the favorable tax regime of the EU Directive in the Czech Income Tax Act.