Resource title

Wide vs. narrow tax bases under optimal investment timing

Resource image

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Resource description

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.

Resource author

Paolo M. Panteghini

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18885

Resource license

Adapt according to the presented license agreement and reference the original author.