Firms investment is a relevant element in economic growth. Therefore, it is important to consider the factors that influence it. In this context, the tax variable has a high impact on the investment decision. The purpose of this paper is to discuss how investing in intangible assets makes the computation of the effective corporate income tax rate especially complex.
Methodology:The methodology applied is based on the method designated "legal research", in the legal-fiscal and accounting aspects. In this method, the analytical discussion of tax and accounting rules relevant to a given phenomenon allow us to assess the potential impact of a certain legal framework on business decisions.Originality: Economic models have traditionally incorporated the tax variable corresponding to the nominal rate of income tax for corporations. However, in the Portuguese tax legal framework there is a wide range of situations in which the tax framework differs from the accounting rules. When this happens, the nominal tax rate does not adequately capture the impact of the tax policy on investment results. This consideration is particularly relevant if the analysis focuses on investments that strongly integrate intangible elements into their composition Findings: Economic methodologies relating to investment and taxation will gain by specifying further the relationship between the nominal tax rate and the effective tax rate, particularly in the area of investments largely composed of intangible assets. Hypotheses of empirical investigation may follow from this study.Practical implications: At the corporate or macroeconomic level, the tax variable is increasingly complex in its determination. In fact, under corporate income tax, and for intangible assets, deductions to income, collection and other benefits can significantly create distance between nominal tax rate and effective tax rate.
Research limitations:It is an analytical approach, which does not develop empirical studies, but leaves clues of statistical investigation.