The Tax Paradox and Weak Tax Neutrality

López R.E.; Gutiérrez Cubillos P.; Figueroa E.


We introduce the concept of weak tax neutrality that establishes that the relationship between the tax rate and the user cost of capital may be non-monotonic. We show that most existing corporate tax systems allow for weak neutrality. That is, given the tax allowances permitted by these systems, it is possible that neutrality may arise for at least one positive corporate tax rate. Moreover, we show the practical relevance of weak neutrality in realistic situations where there are several asset types and heterogeneous levels of firms' debt ratios.

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Título según WOS: The Tax Paradox and Weak Tax Neutrality
Título según SCOPUS: The Tax Paradox and Weak Tax Neutrality
Volumen: 86
Número: 3
Fecha de publicación: 2020
Página de inicio: 1150
Página final: 1169
Idioma: English