Working Paper
Business tax policy under default risk
Nicola Comincioli, Sergio Vergalli, Paolo Panteghini
CESifo, Munich, 2019
CESifo Working Paper No. 7664
CESifo, Munich, 2019
CESifo Working Paper No. 7664
In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax revenue).
CESifo Category
Public Finance
Fiscal Policy, Macroeconomics and Growth
Public Finance
Fiscal Policy, Macroeconomics and Growth
Keywords: capital structure, default risk, business taxation and welfare
JEL Classification: H250, G330, G380