Corporate Tax Asymmetries Under Investment Irreversibility
16 Pages Posted: 8 Sep 2001
Date Written: August 2001
This article studies the effects of corporate tax asymmetries on irreversible investment. We discuss an asymmetric tax scheme where the tax base is given by the firm's return, net of an imputation rate. When the firm's return is less than this rate, however, no tax refunds are allowed. Contrary to common winsdom, this asymmetric scheme may be neutral even when assuming a long-lasting income uncertainty. Neutrality holds even if we add both capital and political uncertainty.
JEL Classification: H25
Suggested Citation: Suggested Citation