To Pay or To Delay: an Economic Analysis of the Decision To Delay and the Incidence of Delaying the Payment of Corporate Income Tax

Abstract

This article examines firms' incentives to borrow from the government through delaying the payment of federal income tax. A contingent claims framework is then used to examine the economic incidence of delayed tax payment on the value of debt, equity, and government claims. Because tax laws and rules governing the priority of claims vary across countries, incentives to delay and incidence are examined for the United States, the United Kingdom, and Canada.