Corporate Taxation in a Dynamic World

Basic issues.- The real option approach.- The entrepreneurial decision.- The choice of the organizational form.- The tax treatment of debt financing.- Foreign Direct Investment and tax avoidance.- Policy issues.- Corporate tax base options.- Broad or narrow tax bases?.- Risk-adjusted or risk-free imputation rate?.- Full loss offset or no-loss offset?.- R-based or S-based taxation?.- Conclusions and topics for future research.

This book analyzes the economic principles of modern corporate taxation. With respect to the existing products it represents a novelty in at least two respects. First of all, it analyzes not only the effects of taxation on firms' marginal choices, but also focuses on the impact of taxation on discrete choices, such as plant location, R&D investment, and new marketing programs. The second novelty is represented by the application of option pricing techniques to corporate taxation. To give an idea of the importance of options it is sufficient to say that managers are aware that new business programs are an opportunity and not an obligation. This means that they behave as if they owned option-rights. Due to the partial irreversibility of their choices, they know that the exercise of such options reduces their business flexibility.

Focuses on the impact of taxation on decisions like plant location, R and D investment, and new marketing programs Applies option pricing techniques to corporate taxation