Investment Valuation with Tax-optimized Financing Decisions and a Tax-optimized Default Alternative

Valuation of tax expense

Both intuition and empirical evidence suggest that higher revenues increase value whereas higher expenses, including higher tax expense, decrease value. Some prior research, however, suggests that higher tax expense may be good news, despite the resulting reduction in after-tax earnings. We conduct a comprehensive investigation and find that surprises in both the current and deferred components...

Self-financing of Tax Cuts

Tax Rate and Tax Base Competition for Foreign Direct Investment

This paper argues that the large reduction in corporate tax rates and only gradual widening of tax bases in many countries over the last decades are consistent with tougher international competition for foreign direct investment (FDI). To make this point we develop a model in which governments compete for FDI using corporate tax rates and tax bases. The model’s predictions regarding the slope o...

Regional Tax Coordination and Foreign Direct Investment Regional Tax Coordination and Foreign Direct Investment *

The paper analyzes the effects of a regionally coordinated profit tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gains. First, for investments that would take place in the region in the absence of coordination, this measure can transfer location rents from the ...

Tax Foundation and Ernst & Young Effects of Tax Policy on Corporate Financing Decisions : Integration of the Corporate and Personal Income Tax

As the size of government continues to grow, so too does the need for reliabl e information about its cost and scope. Since 1937, the Tax Foundation has been monitoring tax and fiscal activities at all levels of government : federal, state and local. In that year, civic-minded businessmen envisioned an independent group of researchers who , by gathering data and publishing information on the pu...