Taxes do Affect Corporate Financing Decisions: The Case of Belgian ACE

In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.allowance for corporate equity, corporate financing decisions

A Service of zbw Taxes do Affect Corporate Financing Decisions: The Case of Belgian ACE

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity. Terms of use: Documents in EconStor may JEL-Code: G300, H250, K340

Determining the impact of taxation on corporate financial decision-making

This PhD project contributes to the corporate finance literature by analyzing several issues related to the impact of taxation on the financial decision-making of companies. The main research question of this doctoral project is twofold. First, it measures how the tax discrimination between debt and equity affects the capital structure of a company. Secondly, it analyzes how the heterogeneity among national tax systems distorts the financial decisions of a multinational enterprise.(IAG 3) -- UCL, 201

Taxes do Affect Corporate Financing Decisions: The Case of Belgian ACE

In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity

Investment and financing strategy of a multinational enterprise under alternative tax designs

This paper investigates the consequences of a series of alternative international tax designs on the strategy of a multinational enterprise regarding the cross border distribution of its investment and the choice of its financing behavior. We start with a world where no international tax rules are at work. Then we successively introduce (i) the rules provided by the OECD Model Tax Convention, (ii) the EU Parent-Subsidiary Directive of July 23, 1990; and (iii) a combination of Allowance for Corporate Equity (ACE) and Comprehensive Business Income Tax (CBIT). Finally, we leave systems based on Separate Accounting (SA) aside and turn to Consolidation and Formulary Apportionment (C&FA) adopted either by all the jurisdictions at work in the model, or by a sole subset of them within the framework of an Enhanced Cooperation Agreement (ECA). JEL: F23, H25, K3

International Tax Consolidation in the European Union: Evidence of Heterogeneity

With regard to this topic, the authors first consider the concept of tax neutrality and its domestic and international implications. They next focus on the rules that each Member State has for a corporate group to adopt group taxation. As a result of the diversity of the national group taxation regimes within the European Union, the authors then suggest a typology for these systems as well as examining the intrinsic features of tax consolidation systems

The dynamics of tax elasticities in the whole European Union

This paper investigates how revenue from taxes reacts over time to a change in their tax base in the European Union (EU). The first novelty of the paper is to estimate the dynamics of revenue-to-base elasticities with an EU country panel to sizeably increase the number of available observations. Such a study has been made possible by a new database of discretionary tax measures. As a second novelty, we add different indicators of the business cycle to test their possible influence on the short-term elasticities. A specific impact is found for all revenue categories, except for consumption taxes, only influenced by the relative cyclical position. Corporate income tax appears to be the most cyclically dependent category, followed by personal income tax. (JEL codes: E32, H2, H3, and H6).SCOPUS: ar.jDecretOANoAutActifinfo:eu-repo/semantics/publishe

Investment and Financing Strategy of a Multinational Enterprise under alternative tax designs

This paper investigates the consequences of a series of alternative international tax designs on the strategy of a multinational enterprise regarding the cross border distribution of its investment and the choice of its financing behavior. We start with a world where no international tax rules are at work. Then we successively introduce (i) the rules provided by the OECD Model Tax Convention, (ii) the EU Parent-Subsidiary Directive of July 23, 1990; and (iii) a combination of Allowance for Corporate Equity (ACE) and Comprehensive Business Income Tax (CBIT). Finally, we leave systems based on Separate Accounting (SA)aside and turn to Consolidation and Formulary Apportionment (C&FA) adopted either by all the jurisdictions at work in the model, or by a sole subset of them within the framework of an Enhanced Cooperation Agreement (ECA)

Investment and Financing Strategy of a Multinational Enterprise under alternative tax designs

This paper investigates the consequences of a series of alternative international tax designs on the strategy of a multinational enterprise regarding the cross border distribution of its investment and the choice of its financing behavior. We start with a world where no international tax rules are at work. Then we successively introduce (i) the rules provided by the OECD Model Tax Convention, (ii) the EU Parent-Subsidiary Directive of July 23, 1990; and (iii) a combination of Allowance for Corporate Equity (ACE) and Comprehensive Business Income Tax (CBIT). Finally, we leave systems based on Separate Accounting (SA)aside and turn to Consolidation and Formulary Apportionment (C&FA) adopted either by all the jurisdictions at work in the model, or by a sole subset of them within the framework of an Enhanced Cooperation Agreement (ECA)