Capital Income Taxation Revisited: The Roles of Information Friction and External Finance

Autor:	Wai-Hong Ho, Yong Wang
Rok vydání:	2015
Předmět:	Macroeconomics Finance Economics and Econometrics business.industry Costly state verification International taxation Physical capital Internal financing Capital (economics) Economics Bond market External financing Optimal tax business
Zdroj:	Pacific Economic Review. 20:225-242
ISSN:	1361-374X
DOI:	10.1111/1468-0106.12104
Popis:	This paper reexamines the classical issue of optimal taxation on capital income in an overlapping-generations growth model where the risky capital-producing projects are financed partially with external funds in the presence of costly state verification. In this context, we first show that the information friction creates standard credit market distortions that are exacerbated by both capital income taxation and external financing. We subsequently show from both growth and welfare perspectives that the optimal tax rate on capital income decreases with the severity of asymmetric information and the extent of external financing. Alternatively, our analysis suggests that the presence of informational friction in the credit market introduces a rationale for more conservative taxation on capital, especially when the need for external financing is high.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::0ce2c3fa19f896928baee43c63db7c43 https://doi.org/10.1111/1468-0106.12104 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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