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Title:Asymmetric taxation of profits and losses and its influence on investment timing: Paradoxical effects of tax increases PDF Logo
Authors:Mehrmann, Annika
Schneider, Georg
Sureth, Caren
Issue Date:2012
Series/Report no.:Arqus-Diskussionsbeiträge zur quantitativen Steuerlehre 134
Abstract:Applying a time-discrete investment model and a setting with an entry and an exit option and cash flow uncertainty we present a dynamic analysis of the impact of various loss offset regimes on risky investment timing decisions. We find that a tax system with loss offset restrictions will not distort timing decisions if the investor can exit the project. By contrast, in a setting without exit flexibility a tax discrimination against losses can cause paradoxical effects. In that respect, we analytically identify conditions for higher taxes to increase investors' propensity to choose early investment and hence accelerate entrepreneurial investment.
Subjects:asymmetric taxation
loss offset restrictions
timing flexibility
investment decisions
uncertainty
tax effects
JEL:H21
H25
Document Type:Working Paper
Appears in Collections:arqus Diskussionsbeiträge zur Quantitativen Steuerlehre

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