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S-based taxation under default risk

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  • Panteghini, Paolo M.

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.
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  • Panteghini, Paolo M., 2006. "S-based taxation under default risk," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1923-1937, November.
    • Handle: RePEc:eee:pubeco:v:90:y:2006:i:10-11:p:1923-1937
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    1. Paolo Panteghini, 2009. "The capital structure of multinational companies under tax competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(1), pages 59-81, February.
    2. Robin Boadway & Motohiro Sato & Jean-Francois Tremblay, 2015. "Cash-flow business taxation revisited: bankruptcy, risk aversion and asymmetric information," Working Papers 1531, Oxford University Centre for Business Taxation.
    3. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.
    4. Paolo M. Panteghini, 2012. "Corporate Debt, Hybrid Securities, and the Effective Tax Rate," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(1), pages 161-186, February.
    5. Paolo M. Panteghini & Sergio Vergalli, 2016. "Accelerated depreciation, default risk and investment decisions," Journal of Economics, Springer, vol. 119(2), pages 113-130, October.
    6. 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.
    7. Cristian Carini & Michele Moretto & Paolo M. Panteghini & Sergio Vergalli, 2020. "Deferred taxation under default risk," Journal of Economics, Springer, vol. 129(1), pages 33-48, January.
    8. Francesca Barion & Raffaele Miniaci & Paolo Panteghini & Maria Laura Parisi, 2010. "Profit Shifting by Debt Financing in Europe," CESifo Working Paper Series 2985, CESifo.
    9. R. Miniaci & M. Parisi & P. Panteghini, 2014. "Debt shifting in Europe," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 397-435, June.
    10. Nicola Comincioli & Paolo M. Panteghini & Sergio Vergalli, 2021. "Welfare effects of business taxation under default risk," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1412-1429, December.
    11. Paolo M. Panteghini & Sergio Vergalli, 2016. "Accelerated depreciation, default risk and investment decisions," Journal of Economics, Springer, vol. 119(2), pages 113-130, October.
    12. 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.
    13. Paolo Panteghini, 2006. "A Simple Explanation for the Unfavorable Tax Treatment of Investment Costs," CESifo Working Paper Series 1784, CESifo.

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