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| Author: | Wijnbergen, S. van Estache, A. |
| Title: | Evaluating the minimum asset tax on corporations: An option pricing approach |
| Journal: | Journal of Public Economics
1999 : JAN, VOL. 71:1, p. 75-95 |
| Index terms: | Companies Assets Taxation Uncertainty Options |
| Language: | eng |
| Abstract: | King-Fullerton methodology can not assess the minimum-asset tax because it can not handle uncertainty. In the paper, an alternative based on option pricing is presented, and shown how carry-over rules, depreciation conventions, and uncertainty affect the minimum asset tax (MAT) burden. Using Brazilian data, it is shown (A) because of the high intersectoral variance of returns on capital, the MAT does not reduce sectoral distortions; (B) while high variance raises the MAT burden, high risk firms are not hit harder by the MAT: high-risk firms also have a high rate of return, which reduces the impact of the MAT. |
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