A CRITIQUE ON LEASE VERSUS BUY ANALYSIS AND GOVERNMENT TAX REVENUE
Keywords:
Lease, Purchase, Government Tax Revenue, Tax Credit.
Abstract
Motivation for leasing is often believed to be the tax rate difference between the lessee and the lessor, allowing both to save on taxes at the government's expense. These short notes challenge this conventional wisdom and demonstrate not only the tax rate difference but also other various leasing parameters that can have an impact on government tax revenue both analytically and numerically. This paper adds additional theoretical groundworks to the literature to support the claim that the positive-sum games do exist among the lessee, the lessor, and the government.
JEL Classification Codes: C6, G3.
References
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Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance, 13thEdition, McGraw-Hill Irwin.
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Eades, K. M., & Marton, E. C. (2002). Incentives for Leasing: Evidence from the Largest U.S. Lessees and Lessors, University of Virginia Working Paper.
Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2018). Corporate Financial Management, 5th Edition, Wohl Publishing.
Lewellen, W. G., Long, M. S., & McConnell, J. J. (1976). Asset Leasing in Competitive Capital Markets, Journal of Finance, 53(1), 131-162.
Levy, H., & Sarnat, M. (1979). Leasing, Borrowing, and Financial Risk, Financial Management, 8(4). 47-54.
Lonergan, W. (2009). Pre and Post Tax Discount Rates and Cash Flows-A Technical Notes, the Journal of Applied Research in Accounting and Finance, 4(1), 41-45.
Long, M. S. (1980). Using a Before or After Tax Discount Rate in the Lease-Buy Decision, the Engineering Economist, 26(4), 263-274.
Musumeci, J., & O’Brien, T. (2019). Lease vs Buy: Clarifying the Impact of tax and Borrowing Rates, Managerial Finance, 45(5), 686-696.
Myers, S. C., Dill, D. A., & Bautista, A. J. (1976). Valuation of Financial Lease Contracts, Journal of Finance, 31(3), 799-819.
Park, S. (2012). Optimal Discount Rate for Government Projects, International Scholarly Research Network, ISRN Economics.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Corporate Finance, 13th Edition, McGraw-Hill Irwin.
Smith, C. W., & Wakeman, M. (1985). Determinants of Corporate Leasing Policy, Journal of Finance, 40(3), 895-908.
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance, 13thEdition, McGraw-Hill Irwin.
Brighham, E. F., & Daves, P. R. (2019). Intermediate Financial Management, 13th Edition, Cengage Learning.
Brigham, E. F., & Ehrhardt, M. C. (2017). Financial Management: Theory and Practice, 15th Edition, Cengage Learning.
Eades, K. M., & Marton, E. C. (2002). Incentives for Leasing: Evidence from the Largest U.S. Lessees and Lessors, University of Virginia Working Paper.
Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2018). Corporate Financial Management, 5th Edition, Wohl Publishing.
Lewellen, W. G., Long, M. S., & McConnell, J. J. (1976). Asset Leasing in Competitive Capital Markets, Journal of Finance, 53(1), 131-162.
Levy, H., & Sarnat, M. (1979). Leasing, Borrowing, and Financial Risk, Financial Management, 8(4). 47-54.
Lonergan, W. (2009). Pre and Post Tax Discount Rates and Cash Flows-A Technical Notes, the Journal of Applied Research in Accounting and Finance, 4(1), 41-45.
Long, M. S. (1980). Using a Before or After Tax Discount Rate in the Lease-Buy Decision, the Engineering Economist, 26(4), 263-274.
Musumeci, J., & O’Brien, T. (2019). Lease vs Buy: Clarifying the Impact of tax and Borrowing Rates, Managerial Finance, 45(5), 686-696.
Myers, S. C., Dill, D. A., & Bautista, A. J. (1976). Valuation of Financial Lease Contracts, Journal of Finance, 31(3), 799-819.
Park, S. (2012). Optimal Discount Rate for Government Projects, International Scholarly Research Network, ISRN Economics.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Corporate Finance, 13th Edition, McGraw-Hill Irwin.
Smith, C. W., & Wakeman, M. (1985). Determinants of Corporate Leasing Policy, Journal of Finance, 40(3), 895-908.
Published
2021-04-21
How to Cite
Wang, G. J. (2021). A CRITIQUE ON LEASE VERSUS BUY ANALYSIS AND GOVERNMENT TAX REVENUE. International Journal of Accounting & Finance Review, 6(2), 125-132. https://doi.org/10.46281/ijafr.v6i2.1094
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2021 Guan Jun Wang
This work is licensed under a Creative Commons Attribution 4.0 International License.
