Arbeitspapier
Corporate Deductibility Provisions and Managerial Incentives
Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to which the return on investment should be taxed depends on how the internal provision of incentive pay and external monitoring by banks interact in constraining the manager and whether retained earnings or new share issues finance investments at the margin. The results are informative for the design of investment subsidies which might be integrated in corporate tax systems such as an Allowance for Corporate Equity or a cash-flow tax.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 4549
- Classification
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Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
Firm Behavior: Theory
- Subject
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corporate taxation
investment subsidies
corporate governance
delegated monitoring
incentive contract
- Event
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Geistige Schöpfung
- (who)
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Köthenbürger, Marko
Stimmelmayr, Michael
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2013
- Handle
- Last update
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20.09.2024, 8:23 AM CEST
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Köthenbürger, Marko
- Stimmelmayr, Michael
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2013