Resumen de Ex-post evaluation of tax reforms: the case of the Italian Partial Ace
This paper is the first attempt to provide an ex-post evaluation of the impact of the much debated Italian Partial ACE scheme (better known as �Dit�) in the period between 1997 and 2000. In its essence, this scheme allowed for partial deductibility of the cost of equity thus partially offsetting full deductibility of interests paid on debt and approaching financial neutrality. We start from a description of the Italian Partial ACE scheme to show main determinants of the choice between debt and equity. Then, we construct an econometric model to explain the choice to use the Italian Partial ACE by Italian corporations in year 2000. Applying this model to a sample containing more than 16.000 observations and controlling also for the tax position of the firm and for heterogeneity of legal types we find that while, as expected, profitability is positively related to the probability to use the Italian Partial ACE in year 2000 this probability is related in an unexpected way to the interest rate. We propose two alternative explanations of these results and thereby indicate directions for future research.
