Advanced Search
MyIDEAS: Login

S-Based Taxation under Default Risk

Contents:

Author Info

  • Paolo Panteghini

Abstract

This article studies the characteristics of a S-based tax system under default risk. In particular we show that its neutrality properties depend on whether debt is protected or unprotected. In the former case, this system is neutral. In the latter case, where default timing is optimally chosen by shareholders, the S-based system is neutral with respect to real decisions only if the firm’s and the lender’s tax rate are equal. However, the shareholders’ decision to default is always distorted.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-07/cesifo1_wp1496.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1496.

as in new window
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:ces:ceswps:_1496

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: capital structure; corporate taxation; neutrality; option pricing;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hayne E. Leland., 1994. "Corporate Debt Value, Bond Covenants, and Optimal Capital Structure," Research Program in Finance Working Papers RPF-233, University of California at Berkeley.
  2. Paolo Panteghini, 2002. "Asymmetric Taxation under Incremental and Sequential Investment," CESifo Working Paper Series 717, CESifo Group Munich.
  3. Peter Sørensen, 2005. "Neutral Taxation of Shareholder Income," International Tax and Public Finance, Springer, vol. 12(6), pages 777-801, November.
  4. Devereux, Michael P, 2003. "Taxing Risky Investment," CEPR Discussion Papers 4053, C.E.P.R. Discussion Papers.
  5. Paolo Panteghini, 2001. "Corporate Tax Asymmetries under Investment Irreversibility," CESifo Working Paper Series 548, CESifo Group Munich.
  6. repec:ebl:ecbull:v:8:y:2004:i:4:p:1-7 is not listed on IDEAS
  7. Fehr, H. & Wiegard, W., 1998. "The Incidence of an Extended ACE Corporation Tax," Papers 16/98, Norwegian School of Economics and Business Administration-.
  8. Steve Bond & Michael Devereux, 1999. "Generalised R-based and S-based taxes under uncertainty," IFS Working Papers W99/09, Institute for Fiscal Studies.
  9. Massimo Bordignon & Silvia Giannini & Paolo Panteghini, 2001. "Reforming Business Taxation: Lessons from Italy?," International Tax and Public Finance, Springer, vol. 8(2), pages 191-210, March.
  10. Robin Boadway & Neil Bruce, 1982. "A General Proposition on the Design of a Neutral Business Tax," Working Papers 461, Queen's University, Department of Economics.
  11. Peter Birch Sørensen, 2003. "Neutral Taxation of Shareholder Income: A Norwegian Tax Reform Proposal," CESifo Working Paper Series 1036, CESifo Group Munich.
  12. Michael Keen & John King, 2002. "The Croatian profit tax: an ACE in practice," Fiscal Studies, Institute for Fiscal Studies, vol. 23(3), pages 401-418, September.
  13. Brennan, Michael J & Schwartz, Edwardo S, 1978. "Corporate Income Taxes, Valuation, and the Problem of Optimal Capital Structure," The Journal of Business, University of Chicago Press, vol. 51(1), pages 103-14, January.
  14. Ernst Fehr & Wolfgang Wiegard, 2001. "The Incidence of an Extended Ace Corporation Tax," CESifo Working Paper Series 484, CESifo Group Munich.
  15. Michael Devereux & Harold Freeman, 1991. "A general neutral profits tax," Fiscal Studies, Institute for Fiscal Studies, vol. 12(3), pages 1-15, August.
  16. McDonald, Robert L & Siegel, Daniel R, 1985. "Investment and the Valuation of Firms When There Is an Option to Shut Down," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 331-49, June.
  17. Bonds, Stephen R. & Devereux, Michael P., 1995. "On the design of a neutral business tax under uncertainty," Journal of Public Economics, Elsevier, vol. 58(1), pages 57-71, September.
  18. Johannes Becker & Clemens Fuest, 2005. "Does Germany Collect Revenue from Taxing Capital Income?," CESifo Working Paper Series 1489, CESifo Group Munich.
  19. Paolo M. Panteghini, 2004. "Wide versus Narrow Tax Bases under Optimal Investment Timing," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(4), pages 482-, December.
  20. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
  21. Paolo M. Panteghini, 2004. "Neutrality Properties of Firm Taxation under Default Risk," Economics Bulletin, AccessEcon, vol. 8(4), pages 1-7.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Paolo Panteghini, 2006. "The Capital Structure of Multinational Companies Under Tax Competition," Working Papers ubs0606, University of Brescia, Department of Economics.
  2. Francesca Barion & Raffaele Miniaci & Paolo M Panteghini & Maria Laura Parisi, 2010. "Profit shifting by debt financing in Europe," Working Papers 1007, University of Brescia, Department of Economics.
  3. Paolo Panteghini, 2008. "Corporate Debt, Hybrid Securities and the Effective Tax Rate," CESifo Working Paper Series 2329, CESifo Group Munich.
  4. Vesa Kanniainen & Paolo M. Panteghini, 2013. "Tax Neutrality: Illusion or Reality? The Case of Entrepreneurship," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(2), pages 167-193, June.
  5. Panteghini, Paolo M., 2007. "Interest deductibility under default risk and the unfavorable tax treatment of investment costs: A simple explanation," Economics Letters, Elsevier, vol. 96(1), pages 1-7, July.
  6. Paolo Panteghini, 2006. "A Simple Explanation for the Unfavorable Tax Treatment of Investment Costs," CESifo Working Paper Series 1784, CESifo Group Munich.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1496. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.