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Article: Progressive taxation, tax exemption, and corporate liquidation policy

TitleProgressive taxation, tax exemption, and corporate liquidation policy
Authors
KeywordsLiquidation policy
Progressive taxation
Real options
Tax exemption
Issue Date2009
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecmod
Citation
Economic Modelling, 2009, v. 26 n. 2, p. 295-299 How to Cite?
AbstractThis paper develops a real options model of a firm that operates in continuous time with an infinite horizon. The firm receives stochastic profit flows that are subject to progressive taxation. Tax progression arises from an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. The firm possesses an option to liquidate its operation, which is optimally exercised when the firm's profit flow reaches an endogenously determined threshold level (the liquidation trigger) from above. We show that the firm's liquidation trigger under progressive taxation increases with either a reduction in the tax exemption threshold or an increase in the corporate income tax rate. Corporate income taxes are thus not neutral when tax schedules are progressive. © 2008 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/60177
ISSN
2015 Impact Factor: 0.997
2015 SCImago Journal Rankings: 0.815
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-05-31T04:05:18Z-
dc.date.available2010-05-31T04:05:18Z-
dc.date.issued2009en_HK
dc.identifier.citationEconomic Modelling, 2009, v. 26 n. 2, p. 295-299en_HK
dc.identifier.issn0264-9993en_HK
dc.identifier.urihttp://hdl.handle.net/10722/60177-
dc.description.abstractThis paper develops a real options model of a firm that operates in continuous time with an infinite horizon. The firm receives stochastic profit flows that are subject to progressive taxation. Tax progression arises from an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. The firm possesses an option to liquidate its operation, which is optimally exercised when the firm's profit flow reaches an endogenously determined threshold level (the liquidation trigger) from above. We show that the firm's liquidation trigger under progressive taxation increases with either a reduction in the tax exemption threshold or an increase in the corporate income tax rate. Corporate income taxes are thus not neutral when tax schedules are progressive. © 2008 Elsevier B.V. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecmoden_HK
dc.relation.ispartofEconomic Modellingen_HK
dc.rightsEconomic Modelling. Copyright © Elsevier BV.en_HK
dc.subjectLiquidation policyen_HK
dc.subjectProgressive taxationen_HK
dc.subjectReal optionsen_HK
dc.subjectTax exemptionen_HK
dc.titleProgressive taxation, tax exemption, and corporate liquidation policyen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0264-9993&volume=26&spage=295&epage=299&date=2009&atitle=Progressive+Taxation,+Tax+Exemption,+and+Corporate+Liquidation+Policyen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.econmod.2008.07.018en_HK
dc.identifier.scopuseid_2-s2.0-58249104120en_HK
dc.identifier.hkuros154316en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-58249104120&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume26en_HK
dc.identifier.issue2en_HK
dc.identifier.spage295en_HK
dc.identifier.epage299en_HK
dc.identifier.isiWOS:000263424400002-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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