Evaluating the minimum asset tax on corporations: an option pricing approach
AbstractKing-Fullerton methodology cannot assess the minimum-asset tax (MAT) because it cannot handle uncertainty. We present an alternative based on option pricing, and show how carry-over rules, depreciation conventions and uncertainty affect the MAT burden. Using Brazilian data, we show that: (a) because of the high intersectoral variance of capital intensity, the MAT does not reduce sectoral distortions; and (b) while high variance raises the MAT burden, high risk firms are not hit harder by the MAT: high-risk firms also have a high rate of return, which reduces the impact of the MAT.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 71 (1999)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- Antonio Estache & Sweder van Wijnbergen, 1999. "Evaluating the minimum asset tax on corporations: an option pricing approach?," ULB Institutional Repository 2013/13378, ULB -- Universite Libre de Bruxelles.
- Antonio Estache & Sweder van Wijnbergen, 1999. "Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach'," ULB Institutional Repository 2013/44003, ULB -- Universite Libre de Bruxelles.
- Estache, Antonio & van Wijnbergen, Sweder, 1992. "Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach," CEPR Discussion Papers 684, C.E.P.R. Discussion Papers.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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