Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82929
Year of Publication: 
2000
Series/Report no.: 
Working Paper No. 2000:4
Publisher: 
Uppsala University, Department of Economics, Uppsala
Abstract: 
The paper shows that a corporate tax policy which is thought to be neutral may have significant incentive effects. This result is established in a model with tax advantage to debt and expectations about a forthcoming tax reform. Investment spurt effects are established and compared to those of a firm with equity finance. A tax-cut cum base-broadening tax reform which leaves the long-run investment incentives of an all-equity firm unaffected is shown to cause a substantial short run investment hike. The findings are illustrated by numerical simulations indicating the magnitudes of the spurt effects.
Subjects: 
Tax neutrality
Tax reform
Investment spurts
Debt finance
JEL: 
H25
H32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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