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The UK corporate tax reform and business investment decisions
Author(s) -
Morgan Eleanor J.
Publication year - 1987
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090080209
Subject(s) - taxable income , allowance (engineering) , investment (military) , corporate tax , capital gains tax , tax reform , capital (architecture) , business , economics , tax credit , monetary economics , finance , investment decisions , indirect tax , tax avoidance , public economics , accounting , operations management , archaeology , behavioral economics , politics , political science , law , history
The 1984 Finance Act made fundamental changes to the UK corporate tax system. Evidence from a detailed study of sixty past investment decisions is used to assess the likely effects of the shift from a high‐tax, high‐allowance system to a system of low taxes and allowances. This suggests that 100% allowances have had little impact on the scale of investment since 1979, reflecting limited taxable capacity and the importance of market considerations in investment decisions. Timing effects were more common, especially among small firms sampled. The post‐tax cost of capital will fall for some firms but few appeared to use strict cost of capital criteria in assessing investments.