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Tax loss offset restrictions: Last resort for the treasury? An empirical evaluation of tax loss offset rectrictions based on micro data

  • Dwenger, Nadja

In Germany, the tax loss carry-forward of corporations significantly increased over the last decade. At the same time only a small percentage of losses have been effectively offset. One potential reason for this puzzle is that stricter loss offset restrictions have been introduced in recent years. I use a newly developed micro simulation model for the German corporate sector to evaluate the fiscal effects of these restrictions. Additionally, distributional breakdowns are provided. I find that the restrictions on the use of tax loss carry-back are rather ineffective while the newly introduced minimum taxation considerably increases yearly tax revenue by 1.1 billion €.

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Paper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 44.

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Date of creation: 2008
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Handle: RePEc:zbw:arqudp:44
Contact details of provider: Web page: http://www.arqus.info/

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  1. Rosanne Altshuler & Alan J. Auerbach, 1987. "The Significance of Tax Law Asymmetries: An Empirical Investigation," NBER Working Papers 2279, National Bureau of Economic Research, Inc.
  2. Alan J. Auerbach, 1983. "Real Determinants of Corporate Leverage," NBER Working Papers 1151, National Bureau of Economic Research, Inc.
  3. Ramb, Fred, 2007. "Corporate marginal tax rate, tax loss carryforwards and investment functions: empirical analysis using a large German panel data set," Discussion Paper Series 1: Economic Studies 2007,21, Deutsche Bundesbank, Research Centre.
  4. John R. Graham & Michael L. Lemmon, 1998. "Measuring Corporate Tax Rates And Tax Incentives: A New Approach," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(1), pages 54-65.
  5. Jeffrey MacKie-Mason, 1988. "Do Taxes Affect Corporate Financing Decisions?," NBER Working Papers 2632, National Bureau of Economic Research, Inc.
  6. Mintz, Jack M, 1988. "An Empirical Estimate of Corporate Tax Refundability and Effective Tax Rates," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 225-31, February.
  7. Graham, John R., 1996. "Debt and the marginal tax rate," Journal of Financial Economics, Elsevier, vol. 41(1), pages 41-73, May.
  8. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
  9. Stefan Bach & Nadja Dwenger, 2007. "Unternehmensbesteuerung: trotz hoher Steuersätze mäßiges Aufkommen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(5), pages 57-65.
  10. Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. " On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-78, July.
  11. Cordes, Joseph J & Sheffrin, Steven M, 1983. " Estimating the Tax Advantage of Corporate Debt," Journal of Finance, American Finance Association, vol. 38(1), pages 95-105, March.
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