Asymmetric taxation of profits and losses and its influence on investment timing: Paradoxical effects of tax increases
AbstractApplying a time-discrete investment model and a setting with an entry and an exit option and cash flow uncertainty we present a dynamic analysis of the impact of various loss offset regimes on risky investment timing decisions. We find that a tax system with loss offset restrictions will not distort timing decisions if the investor can exit the project. By contrast, in a setting without exit flexibility a tax discrimination against losses can cause paradoxical effects. In that respect, we analytically identify conditions for higher taxes to increase investors' propensity to choose early investment and hence accelerate entrepreneurial investment. --
Download InfoIf 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.
Bibliographic InfoPaper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 134.
Date of creation: 2012
Date of revision:
Contact details of provider:
Web page: http://www.arqus.info/
asymmetric taxation; loss offset restrictions; timing flexibility; investment decisions; uncertainty; tax effects;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-PBE-2012-07-29 (Public Economics)
- NEP-PPM-2012-07-29 (Project, Program & Portfolio Management)
- NEP-PUB-2012-07-29 (Public Finance)
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.:
- Paolo Panteghini, 2002.
"Asymmetric Taxation under Incremental and Sequential Investment,"
CESifo Working Paper Series
717, CESifo Group Munich.
- Paolo M. Panteghini, 2005. "Asymmetric Taxation under Incremental and Sequential Investment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 761-779, December.
- Paolo M. Panteghini, 2001.
"Corporate Tax Asymmetries under Investment Irreversibility,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 58(3), pages 207-, July.
- Paolo Panteghini, 2001. "Corporate Tax Asymmetries under Investment Irreversibility," CESifo Working Paper Series 548, CESifo Group Munich.
- Cooper, Michael & Knittel, Matthew, 2006. "Partial Loss Refundability: How Are Corporate Tax Losses Used?," National Tax Journal, National Tax Association, vol. 59(3), pages 651-63, September.
- Pennings, Enrico, 2000. "Taxes and stimuli of investment under uncertainty," European Economic Review, Elsevier, vol. 44(2), pages 383-391, February.
- Agliardi, Elettra, 2001. "Taxation and Investment Decisions: A Real Options Approach," Australian Economic Papers, Wiley Blackwell, vol. 40(1), pages 44-55, March.
- Paolo Panteghini, 2001.
"On Corporate Tax Asymmetries and Neutrality,"
German Economic Review,
Verein für Socialpolitik, vol. 2(3), pages 269-286, 08.
- Luis H. R. Alvarez & Erkki Koskela, 2008. "Progressive Taxation, Tax Exemption, and Irreversible Investment under Uncertainty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(1), pages 149-169, 02.
- Agliardi, Elettra & Agliardi, Rossella, 2008. "Progressive taxation and corporate liquidation policy," Economic Modelling, Elsevier, vol. 25(3), pages 532-541, May.
- Stefan Hirth & Marliese Uhrig-Homburg, 2010. "Investment Timing when External Financing is Costly," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7-8), pages 929-949.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.