Resource title

A simple explanation for the unfavorable tax treatment of investment costs

Resource image

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Resource description

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.

Resource author

Paolo M. Panteghini

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25829

Resource license

Adapt according to the presented license agreement and reference the original author.