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Corporate Tax Asymmetries under Investment Irreversibility

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  • Paolo M. Panteghini

Abstract

This article studies the effects of corporate tax asymmetries on irreversible investment. We discuss an asymmetric tax scheme where the tax base is given by the firm's return,net of an imputation rate. When the firm's return is less than this rate, however, no tax refunds are allowed. Contrary to common wisdom, this asymmetric scheme may be neutral even when assuming a long-lasting income uncertainty. Neutrality holds even if we add both capital and political uncertainty.

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  • Paolo M. Panteghini, 2002. "Corporate Tax Asymmetries under Investment Irreversibility," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 207-226, July.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200207)58:3_207:ctauii_2.0.tx_2-6
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    Cited by:

    1. Luis H. R. Alvarez & Erkki Koskela, 2005. "Progressive Taxation and Irreversible Investment under Uncertainty," CESifo Working Paper Series 1377, CESifo.
    2. Kalamov, Zarko Y. & Runkel, Marco, 2016. "On the implications of introducing cross-border loss-offset in the European Union," Journal of Public Economics, Elsevier, vol. 144(C), pages 78-89.
    3. Panteghini, Paolo M., 2006. "S-based taxation under default risk," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1923-1937, November.
    4. Alessandro Fedele & Paolo M. Panteghini & Sergio Vergalli, 2011. "Optimal Investment and Financial Strategies under Tax‐Rate Uncertainty," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 438-468, November.
    5. 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.
    6. Niemann, Rainer, 2004. "Entscheidungswirkungen von Verlustverrechnungsbeschränkungen bei der Steuerplanung grenzüberschreitender Investitionen," Tübinger Diskussionsbeiträge 276, University of Tübingen, School of Business and Economics.
    7. Niemann, Rainer & Sureth, Caren, 2008. "Steuern und Risiko als substitutionale oder komplementäre Determinanten unternehmerischer Investitionspolitik?," arqus Discussion Papers in Quantitative Tax Research 51, arqus - Arbeitskreis Quantitative Steuerlehre.
    8. Fahr, René & Janssen, Elmar & Sureth, Caren, 2014. "Can tax rate increases foster investment under entry and exit flexibility? Insights from an economic experiment," arqus Discussion Papers in Quantitative Tax Research 166, arqus - Arbeitskreis Quantitative Steuerlehre.
    9. Rainer Niemann, 2007. "The Impact of Tax Uncertainty on Irreversible Investment," CESifo Working Paper Series 2075, CESifo.
    10. Niemann, Rainer, 2006. "The impact of tax uncertainty on irreversible investment," arqus Discussion Papers in Quantitative Tax Research 21, arqus - Arbeitskreis Quantitative Steuerlehre.
    11. 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.
    12. Rainer Niemann, 2011. "Asymmetric Taxation and Performance-Based Incentive Contracts," CESifo Working Paper Series 3363, CESifo.
    13. Nam Foo & Harry Bloch & Ruhul Salim, 2017. "Assessing the timing of mining investment under tax policy uncertainty: the case of the Asia-Pacific region," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 30(2), pages 117-139, July.
    14. Niemann, Rainer, 2003. "Wie schädlich ist die Mindestbesteuerung? Steuerparadoxa in der Verlustrechnung," Tübinger Diskussionsbeiträge 259, University of Tübingen, School of Business and Economics.
    15. Ralf Ewert & Rainer Niemann, 2010. "Limited Liability, Asymmetric Taxation, and Risk Taking - Why Partial Tax Neutralities can be Harmful," CESifo Working Paper Series 3301, CESifo.
    16. 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.
    17. Mehrmann, Annika & Schneider, Georg & Sureth, Caren, 2012. "Asymmetric taxation of profits and losses and its influence on investment timing: Paradoxical effects of tax increases," arqus Discussion Papers in Quantitative Tax Research 134, arqus - Arbeitskreis Quantitative Steuerlehre.
    18. Rainer Niemann & Caren Sureth, 2011. "The Impact of Differential Capital Income Taxation on the Value of Risky Projects," Economics Bulletin, AccessEcon, vol. 31(2), pages 1047-1054.
    19. Martin Fochmann & Martin Jacob, 2011. "Behavioral Explanation of Tax Asymmetries," FEMM Working Papers 110021, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    20. 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.
    21. Paolo Panteghini, 2006. "A Simple Explanation for the Unfavorable Tax Treatment of Investment Costs," CESifo Working Paper Series 1784, CESifo.

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    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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