Progressive taxation and corporate liquidation: Analysis and policy implications

Elettra Agliardi and Rossella Agliardi

Journal of Policy Modeling, 2009, vol. 31, issue 1, 144-154

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 firm's 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 firm's 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)
Date: 2009
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Progressive Taxation and Corporate Liquidation: Analysis and Policy Implications (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:31:y:2009:i:1:p:144-154

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