Tax Incentive Provisions And The User Cost Of Capital: The Case Of Greece

Abstract

<p class="MsoBodyText" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in; tab-stops: .5in;"><span style="font-size: 10pt; font-weight: normal; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">According to the neoclassical framework the quantitative influence of tax policy measures on capital spending is exercised through the parameters that define the desired stock of capital and more specifically through the user cost determinant (c). A tax-adjusted user cost expression is formulated and time series of user cost are calculated using the usual tax parameters (like depreciation allowances, tax credits, investment grants, investment allowances and the like) that are incorporated in the value of c and which have been taken from the Greek tax incentive structure. The test of fiscal parameters on investment was made for the two kinds of capital assets, equipment and structures, since expenditure on these two comprise on average an almost 85 per cent of total manufacturing investment in Greece. What the research showed for the period under investigation was that c, the cost of capital variable, was not affected much by tax provisions, and in its turn could not affect decisively the desired level of capital stock and thus the amount of net investment.(JEL: E62) </span></span></p>

Marginal Effective Tax Rates And Tax Incentive Structure Evaluation: The Case Of Greece

“…These two cases of neutrality indicate a common tax rate to all marginal investments, which is either the statutory tax rate in case of economic depreciation with interest deductibility, or a zero rate in case of expensing. Since, as indicated elsewhere (Anastassiou, 2006b), the Greek tax system had in a period of years values of z below unity, which have resulted in non-uniform positive marginal tax rates, it can be said that the tax system is depressing investment and one may seek the possibility for the designing of a tax system that can provide neutrality.…”