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Title:Wide vs. narrow tax bases under optimal investment timing PDF Logo
Authors:Panteghini, Paolo M.
Issue Date:2004
Series/Report no.:CESifo working papers 1246
Abstract:This article compares an ACE system with a CBIT system in an open economy. Using a realoption approach we show that, if a firm can decide when to invest, a tradeoff is found. According to traditional wisdom, a high-income firm investing in an ACE system faces a heavier tax burden at each instant. On the other hand, it finds it optimal to invest earlier, thereby enjoying a longer stream of income. If, given the same tax burden, the latter effect is great enough, the firm will prefer the ACE system. In this article we also run a simulation which shows that preference for an ACE system is a realistic result.
Subjects:corporate taxation
open economy
timing and real options
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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