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Nam, Chang Woon
Year of Publication: 
Series/Report no.: 
CESifo Working Paper 528
This study compares incentive effects of various tax depreciation methods which are currently employed in selected OECD countries. Their generosity is determined on the basis of Samuelson's true economic depreciation. For this purpose, the present value model is applied. The central issue is that the so-called historical cost accounting method, which is adopted in practice when calculating the corporate tax base, causes fictitious profits in inflationary phases that should also be taxed. Therefore, in periods with inflation generous tax depreciation provisions do not adequately promote private investment as designed, but partly compensate such losses caused by inflation.
true economic depreciation
tax depreciation rules
corporate tax
investment decision
net present value model
Document Type: 
Working Paper
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