A Problem of Financial Market Equilibrium When the Timing of Tax Payments is Indeterminate
21 Pages Posted: 9 Mar 2004 Last revised: 8 Sep 2022
Date Written: October 1985
Abstract
If firms are indifferent about the timing of dividends, the government's cash flow from taxes on dividends is indeterminate. In an earlier paper, I showed in the context of a world without uncertainty that variations in tax receipts from this source would have no real effects. The extension of the analysis to a world of risk turns out to involve new elements that may be of some general interest. In particular, the conditions for neutrality seem less likely to be fulfilled in a practical context.
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