Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach

Antonio Estache and Sweder van Wijnbergen

No 684, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: King-Fullerton methodology cannot assess the minimum-asset tax (MAT) because it cannot handle uncertainty. We present an alternative based on option pricing, and show how carry-over rules, depreciation conventions and uncertainty affect the MAT burden. Using Brazilian data, we show that: (a) because of the high intersectoral variance of capital intensity, the MAT does not reduce sectoral distortions; and (b) while high variance raises the MAT burden, high risk firms are not hit harder by the MAT: high-risk firms also have a high rate of return, which reduces the impact of the MAT.

Keywords: Brazil; Minimum Asset Taxes; Option Pricing; Tax Incentives; Uncertainty (search for similar items in EconPapers)
JEL-codes: H21 H25 (search for similar items in EconPapers)
Date: 1992-06
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=684 (application/pdf)

Related works:
Journal Article: Evaluating the minimum asset tax on corporations: an option pricing approach (1999)
Working Paper: Evaluating the minimum asset tax on corporations: an option pricing approach? (1999)
Working Paper: Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach' (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:684

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=684

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().