Tax Planning and Firm Value Creation: A Financial Optimization Model under Variable Fiscal Scenarios
Keywords:
Tax planning, Effective tax rate, WACC, Firm value creation, Financial optimization, Tax shieldAbstract
Introduction: Tax planning constitutes a strategic mechanism that directly influences firm value creation by affecting after-tax cash flows and the weighted average cost of capital. In contexts of high fiscal pressure and regulatory volatility, tax optimization becomes structurally relevant within corporate financial management.
Objective: To analyze the impact of tax planning on firm value creation through a formal financial optimization model under variable fiscal scenarios.
Method: A quantitative, non-experimental study based on financial modeling and deterministic optimization was conducted. A representative firm with a defined capital structure was simulated under different levels of effective tax rate reduction and leverage adjustments. WACC and firm value were estimated using a perpetual growth model, incorporating regulatory and financial constraints.
Result: Sustainable reductions in the effective tax rate generated nonlinear increases in firm value. The joint optimization of tax planning and capital structure produced a maximum increase of 27.4% compared to the baseline scenario. The elasticity of firm value with respect to the effective tax rate exceeded one, confirming a multiplier effect driven by the interaction between after-tax cash flows and discount mechanisms.
Conclusions: Tax planning functions as a structural mechanism of value creation when coherently integrated into financial strategy. The observed effect is multiplicative, though subject to diminishing marginal returns and regulatory constraints. Sustainable value maximization requires balancing fiscal optimization with financial risk control.
Empirical contribution: The study mathematically formalizes tax planning as an optimization problem subject to fiscal and financial constraints, providing quantitative evidence of its direct impact on firm value under controlled conditions.
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