Discussion Paper

No. 2012-31 | June 27, 2012
Italy’s ACE Tax and Its Effect on a Firm’s Leverage

Abstract

This article describes the new ACE-type system implemented in Italy since 2012. The authors first show that this system reduces but does not eliminate the financial distortion due to interest deductibility. Using a dataset of Italian companies, the authors analyze the impact of this relief on Italian firm capital structure. Despite the permanence of a tax advantage and its gradual implementation, the ACE relief is estimated to reduce significantly leverage. By decreasing default risk it is also expected to reduce systemic risk.

JEL Classification:

H25, H32

Assessment

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Links

Cite As

Paolo Panteghini, Maria Laura Parisi, and Francesca Pighetti (2012). Italy’s ACE Tax and Its Effect on a Firm’s Leverage. Economics Discussion Papers, No 2012-31, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-31


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August 07, 2012 - 09:23

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August 31, 2012 - 11:13

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