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Business Tax Policy under Default Risk

Author

Listed:
  • Nicola Comincioli

    (University of Brescia and Fondazione Eni Enrico Mattei)

  • Sergio Vergalli

    (University of Brescia and Fondazione Eni Enrico Mattei)

  • Paolo M. Panteghini

    (University of Brescia and CESifo)

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 M. Panteghini, 2019. "Business Tax Policy under Default Risk," Working Papers 2019.11, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2019.11
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    References listed on IDEAS

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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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