Debt Bias in Corporate Income Taxation and the Costs of Banking Crises
Author | : Sven Langedijk |
Publisher | : |
Total Pages | : 0 |
Release | : 2015 |
ISBN-10 | : OCLC:913794090 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Debt Bias in Corporate Income Taxation and the Costs of Banking Crises written by Sven Langedijk and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate income taxation (CIT) in most countries favors debt over equity financing, leading to over-indebtedness. This problem is particularly acute for the financial sector. We estimate financial-stability benefits of eliminating this debt bias. We estimate the long-run effects of CIT on bank leverage and, using a Vasicek-based model of banking crisis losses, we find that eliminating this debt bias could reduce public finance losses in the range of 30 to 70%. These results hold even for conservative estimates of bank-leverage and portfolio-risk effects of CIT changes.