Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30698 
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dc.contributor.authorKeuschnigg, Christianen
dc.contributor.authorRibi, Evelynen
dc.date.accessioned2010-02-03-
dc.date.accessioned2010-05-14T08:24:10Z-
dc.date.available2010-05-14T08:24:10Z-
dc.date.issued2010-
dc.identifier.urihttp://hdl.handle.net/10419/30698-
dc.description.abstractIn the absence of financing frictions, profit taxes reduce investment by their effect on the user cost of capital. With finance constraints due to moral hazard, investment becomes sensitive to cash-flow and own equity of firms. We propose a corporate finance model of investment and derive three central results: (i) Even small taxes impose first order welfare losses on financially constrained firms; (ii) ACE and cashflow tax systems, which are investment neutral in the neoclassical model, are no longer neutral when firms are finance constrained. (iii) When banks are active and provide external finance together with monitoring services, the two systems not only reduce investment, but are also no longer equivalent. With active banks, investment is subject to double moral hazard and the timing of tax payments becomes important. The ACE system gives tax relief at the return stage and provides better incentives than a cash-flow tax which gives tax relief upfront.en
dc.language.isoengen
dc.publisher|aCenter for Economic Studies and ifo Institute (CESifo) |cMunichen
dc.relation.ispartofseries|aCESifo Working Paper |x2914en
dc.subject.jelG38en
dc.subject.jelH25en
dc.subject.ddc330en
dc.subject.keywordfinance constraintsen
dc.subject.keywordprofit taxen
dc.subject.keywordcash-flow taxen
dc.subject.keywordACE taxen
dc.titleProfit taxation and finance constraints-
dc.typeWorking Paperen
dc.identifier.ppn617786283en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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