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on Accounting and Auditing |
| By: | Ignacio Velez Pareja |
| Abstract: | I present a set of conditions for defining risky debt associated to cash flow and not to accounting earnings. I explain why realization of tax shields for finite cash flows in any period of time t are correlated to Earnings before Interest and Taxes and are not correlated to interest expenses at time t. Using Monte Carlo Simulation I explore the behavior of the four basic cash flows, Earnings before Interest and Taxes plus Other income OI, and interest charges, with eight scenarios applied to a financial planning model. I conclude that the risk of tax shields is Ku, the unlevered cost of equity. |
| Date: | 2010–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000162:007184&r=acc |
| By: | David Albouy |
| Abstract: | In theory, federal transfers that make household location decisions efficient will offset differences in federal-tax payments and local tax revenues on capital, but not local tax revenues from residents. Transfers that redistribute resources equitably across regions will likely target areas with individuals of low earnings potential or low real incomes. Examining these metrics in practice, federal transfer differences across Canadian provinces are neither efficient nor equitable, but exacerbate pre-existing inefficiencies and underfund minorities. Total locational inefficiencies cost the economy 0.41 percent of income annually and cause Atlantic and Prairie provinces to have populations 31 percent beyond their efficient long-run levels. |
| JEL: | H73 H77 J61 R13 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16144&r=acc |
| By: | J-T Guo; A Krause |
| Abstract: | This paper addresses the question as to whether it is optimal to use separating or pooling nonlinear income taxation, or to use linear income taxation, when the government cannot commit to its future tax policy. We consider both two-period and infinite-horizon settings. Under empirically plausible parameter values, separating income taxation is optimal in the two-period model, whereas linear income taxation is optimal when the time horizon is infinite. The welfare effects of varying the discount rate, the degree of wage inequality, and the population of high-skill workers are also explored. For realistic changes in these parameters, separating income taxation remains optimal in the two-period formulation, and linear income taxation remains optimal in the infinite-horizon model. |
| Keywords: | Dynamic Income Taxation; Commitment. |
| JEL: | H21 H24 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:10/15&r=acc |
| By: | Alfredo Martín-Oliver (Banco de España); Vicente Salas-Fumás (Universidad de zaragoza) |
| Abstract: | This paper models the investment behaviour of a multi-asset firm with market power that accumulates valuable intangible assets to complement the IT capital. The investment model is estimated using data from Spanish banks on assets of different nature: material (branches, financial), immaterial (advertising and IT) and intangible (training of workers). The paper estimates that the representative bank spends five additional Euros per Euro invested in IT-related assets in complementary intangible assets or, equivalently, intangibles amount to approximately 10% of the economic value of the representative bank. The remaining economic value is distributed between 28% from rents attributed to market power, and 62% to the cost of market-purchased assets. |
| Keywords: | multi-asset firm, investment, intangible assets, banks |
| JEL: | G21 D92 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1020&r=acc |
| By: | François Gourio; Jianjun Miao |
| Abstract: | We develop a dynamic general equilibrium model to study the impact of the 2003 dividend and capital gains tax cuts. In the model, firms are heterogeneous in productivity and make investment and financing decisions subject to capital adjustment costs, equity issuance costs, and collateral constraints. We show that when the dividend and capital gains tax cuts are unexpected and permanent, dividend payments, equity issuance, and aggregate investment rise immediately. By contrast, when these tax cuts are unexpected and temporary, aggregate investment falls in the short run. This fall allows firms to distribute large dividends initially in response to the temporary dividend tax cut. We also find that the effects of a temporary dividend tax cut are very different from those of a temporary capital gains tax cut. |
| JEL: | D92 E22 E62 G31 H32 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16157&r=acc |