Uncertainty, fairness and corporate tax

This book critically examines how corporate tax systems, particularly the taxation of loss firms, exacerbate the challenges businesses face during times of economic crisis (Desai & Dharmapala, 2006). Special attention is given to the unfair tax treatment of loss firms—those that, through no fault of their own, find themselves in a position where their forecasted profits do not materialize (Lisowsky, Robinson, & Schmidt, 2013). The system of pre-paid taxes not only places them at a disadvantage in terms of cash flow but also invites opportunistic behavior among managers, who may manipulate deferred tax assets and liabilities in response to this uncertainty (Hanlon, Maydew, & Shevlin, 2008). A more equitable tax policy, one that considers the unpredictability of economic cycles, would reduce the financial burden on firms in distress, ensuring that tax obligations are tied more closely to real economic performance (Slemrod, 2007).