Italy's ACE Tax and Its Effect on a Firm's Leverage
21 Pages Posted: 6 Jul 2012
Date Written: June 29, 2012
Abstract
This article describes the new ACE-type system implemented in Italy since 2012. We have first shown that this system reduces but does not eliminate the financial distortion due to interest deductibility. Using a dataset of Italian companies, we analyzed 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.
Keywords: ACE, business taxation, leverage
JEL Classification: H250, H320
Suggested Citation: Suggested Citation
Panteghini, Paolo M. and Parisi, Maria Laura and Pighetti, Francesca, Italy's ACE Tax and Its Effect on a Firm's Leverage (June 29, 2012). CESifo Working Paper Series No. 3869, Available at SSRN: https://ssrn.com/abstract=2101063 or http://dx.doi.org/10.2139/ssrn.2101063
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