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Business tax policy under default risk

Author

Listed:
  • Nicola Comincioli
  • Sergio Vergalli
  • Paolo Panteghini

Abstract

In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax revenue).

Suggested Citation

  • Nicola Comincioli & Sergio Vergalli & Paolo Panteghini, 2019. "Business tax policy under default risk," CESifo Working Paper Series 7664, CESifo.
    • Handle: RePEc:ces:ceswps:_7664
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    References listed on IDEAS

    as
    1. Paolo M. Panteghini & Sergio Vergalli, 2016. "Accelerated depreciation, default risk and investment decisions," Journal of Economics, Springer, vol. 119(2), pages 113-130, October.
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    9. Branch, Ben, 2002. "The costs of bankruptcy: A review," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 39-57.
    10. Paolo M. Panteghini & Sergio Vergalli, 2016. "Accelerated depreciation, default risk and investment decisions," Journal of Economics, Springer, vol. 119(2), pages 113-130, October.
    11. Saul Estrin & Tomasz Mickiewicz & Anna Rebmann, 2017. "Prospect theory and the effects of bankruptcy laws on entrepreneurial aspirations," Small Business Economics, Springer, vol. 48(4), pages 977-997, April.
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    13. Francesco Cohen & Alessandro Fedele & Paolo M. Panteghini, 2016. "Corporate taxation and financial strategies under asymmetric information," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 9-34, April.
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    More about this item

    Keywords

    capital structure; default risk; business taxation and welfare;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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