http://dx.doi.org/10.31703/gmsr.2024(IX-IV).14
10.31703/gmsr.2024(IX-IV).14
Published : Dec 2024
Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance
Economists and legal experts say, Interest Tax Shield (ITS) available to debt, causes over-indebtedness that ultimately causes financial crisis and financial instability. Many researchers pointed out the necessity to re-frame these subsidizing corporate tax regulations available to debt. We have proposed to abolish (ITS) and introduce, an Islamic corporate tax policy, Rental Tax Shield (RTS) available to Sukuk-al-Ijarah instead of ITS. For data analysis, the study used a simulation technique and drew different experiments to investigate the performance of leveraged and zero-leverage firms and their values with conventional tax policies and proposed tax policies. The findings showed that RTS from Sukuk financing is more beneficial, for a firm's value and cost of capital, as compared to ITS from debt financing. It is expected to mitigate financial distress and bankruptcy and will enhance the overall financial stability of the corporate sector.
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Excessive Debt, Financial Stability, Interest Tax Shield, Rental Tax Shield, Sukuk
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(1) Abid Izaz
Phd. Scholar, COMSATS University Islamabad (CUI), Lahore Campus, Punjab, Pakistan.
(2) Waheed Akhter
Associate Professor, Center of Islamic Finance, COMSATS University Islamabad (CUI) Lahore Campus, Punjab, Pakistan.
(3) Qamar Uz Zaman
Associate Professor, COMSATS University Islamabad (CUI) Sahiwal Campus, Punjab, Pakistan.
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Cite this article
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APA : Izaz, A., Akhter, W., & Zaman, Q. U. (2024). Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance. Global Management Sciences Review, IX(IV), 169-181. https://doi.org/10.31703/gmsr.2024(IX-IV).14
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CHICAGO : Izaz, Abid, Waheed Akhter, and Qamar Uz Zaman. 2024. "Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance." Global Management Sciences Review, IX (IV): 169-181 doi: 10.31703/gmsr.2024(IX-IV).14
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HARVARD : IZAZ, A., AKHTER, W. & ZAMAN, Q. U. 2024. Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance. Global Management Sciences Review, IX, 169-181.
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MHRA : Izaz, Abid, Waheed Akhter, and Qamar Uz Zaman. 2024. "Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance." Global Management Sciences Review, IX: 169-181
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MLA : Izaz, Abid, Waheed Akhter, and Qamar Uz Zaman. "Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance." Global Management Sciences Review, IX.IV (2024): 169-181 Print.
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OXFORD : Izaz, Abid, Akhter, Waheed, and Zaman, Qamar Uz (2024), "Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance", Global Management Sciences Review, IX (IV), 169-181
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TURABIAN : Izaz, Abid, Waheed Akhter, and Qamar Uz Zaman. "Interest Tax Shield, vs Rental Tax Shield and Financial Crises: A Model for Sustainable Finance." Global Management Sciences Review IX, no. IV (2024): 169-181. https://doi.org/10.31703/gmsr.2024(IX-IV).14