A simple explanation for the unfavorable tax treatment of investment costs

Paolo M. Panteghini

The evidence shows that in most countries the present value of depreciation allowances is less than 100% of the cost of capital. In this article we use a real-option model with debt financing, and show that less favorable depreciation allowances are offset by tax benefits arising from debt financing. Allowing partial deduction of capital cost is thus a necessary condition for investment neutrality to hold.

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Year of publication:	2006
Authors:	Panteghini, Paolo
Publisher:	München : Univ., Center for Economic Studies [u.a.]
Subject:	Investitionspolitik \| Investment policy \| Auslandsinvestition \| Foreign investment \| Steuerpolitik \| Tax policy \| USA \| United States \| Theorie \| Theory \| Fremdfinanzierung \| Investition \| Steuer

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Extent:	12 S. graph. Darst.
Series:	CESifo working papers : the international platform of Ludwig-Maximilians University's Center for Economic Studies and the Ifo Institute. - Munich : CESifo, ISSN 1617-9595, ZDB-ID 2023380-2. - Vol. 1784
Type of publication:	Book / Working Paper
Language:	English
Notes:	Literaturverz. S. 11 - 12 Internetausg.: http://www.cesifo-group.de/~DocCIDL/cesifo1_wp1784.pdf
Source:	ECONIS - Online Catalogue of the ZBW

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