Progressive Taxation and Corporate Liquidation: Analysis and Policy Implications

Elettra Agliardi () and Rossella Agliardi ()
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Rossella Agliardi: University of Bologna

Working Paper Series from Rimini Centre for Economic Analysis

Abstract: This paper contributes to the debate on alternative corporate tax schemes, employing a rigorous real option methodology which has never been used to study both liquidation policy and taxation. Different tax systems are considered, according to whether the tax regime is progressive or flat and losses are deductible or not. The critical liquidation threshold is derived as a function of interest expenses, the firmÕs driving parameters and the tax rates and taxation brackets. It is shown that only the adoption of a flat tax plan does not interfere with the firmÕs liquidation policy, while any progressive tax schedule can slow down or speed up the closure policy.

Keywords: Corporate debt; default risk; progressive tax; real options. (search for similar items in EconPapers)
JEL-codes: G3 G32 G33 G12 H2 H32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-pbe and nep-pub
Date: 2007-07, Revised 2007-07

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http://www.rcfea.org/RePEc/pdf/wp29_07.pdf

Related works:
Journal Article: Progressive taxation and corporate liquidation: Analysis and policy implications (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:rim:rimwps:29-07

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