Corporate Taxation and Investment Decision-Making
Summary
Corporate taxation exerts a profound influence on firms’ choices over capital allocation, financing structures and the timing and scale of investment projects. Tax provisions such as depreciation allowances, loss carryforwards and repatriation levies alter after-tax cash flows, thereby reshaping net present values and hurdle rates. Variations in statutory and effective tax rates across jurisdictions further inform decisions on foreign direct investment and the repatriation of overseas earnings. Non-income tax incentives—from tax credits for research and development to investment allowances—can stimulate specific activities but may also introduce complexity and uncertainty. Firms balance the benefits of tax deferrals and credits against compliance costs and the risk of adverse policy shifts. In aggregate, these interactions shape productivity growth, cross-border capital flows and the design of tax policy itself, with implications for global competitiveness and welfare.
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Corporate Taxation and Investment Decision-Making publication trend
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Technical terms
Net operating losses (NOLs): Losses that firms may carry forward to offset future taxable income, reducing tax liabilities in profitable years.
Repatriation tax: A levy on foreign-source profits when they are brought back to a firm’s home jurisdiction.
Global intangible low-taxed income (GILTI): A U.S. tax regime imposing a minimum tax on foreign earnings of intangible assets held by multinationals.
Policy uncertainty: Unpredictability about future tax rates or regulations that affects firms’ risk assessments and investment timing.
References
- The effect of limited tax loss carryforwards on corporate investment. Journal of Accounting and Economics (2025).
- The initial effect of U.S. tax reform on foreign acquisitions. Review of Accounting Studies (2023).
- Risky business: policy uncertainty and investment. International Tax and Public Finance (2022).
- The Relevance of Non‐Income Tax Relief*. Contemporary Accounting Research (2022).
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