Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/59879 
Year of Publication: 
2012
Series/Report no.: 
arqus Discussion Paper No. 134
Publisher: 
Arbeitskreis Quantitative Steuerlehre (arqus), Berlin
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

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