Tax policy and macro-finance in a competitive global economy where government is considered as firms' third financial stakeholder
AbstractDomestic tax policies must provide needed revenues for public infrastructure and social programs and must be structured to promote sustainable, growing, vibrant economies where individual rights and living standards are preserved or improved. We propose a macro-financial model be included with traditional financial macroeconomic theory postulating that, among other things, economic activity results from net international trade, inter-country capital flows, aggregate effects of all domestic private and public saving and investment and consumption decisions. We modify Modigliani and Miller's capital structure propositions (Modigliani and Miller, 1958, 1963) by adding government as the third major financial stakeholder where government possesses a stake in the firm because of the potential, just as stockholders, to receive future cash flows. We posit a 'conservation of value' where capital structure and the domestic tax structure have no effect on total firm value; however, affect relative stakeholder values, discount rates, capital investment and flow of capital into and out of a country.
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Bibliographic InfoArticle provided by Inderscience Enterprises Ltd in its journal Global Business and Economics Review.
Volume (Year): 14 (2012)
Issue (Month): 1/2 ()
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Web page: http://www.inderscience.com/browse/index.php?journalID=168
tax structure; capital structure; government; financial stakeholders; growth; tax policy; macrofinance; macroeconomic theory; stakeholder values; discount rates; capital investment; capital flow.;
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