Are Tax Incentive Provisions Always Operative? Evidence From The Greek Manufacturing Industry

Abstract

Tax incentives have been provided in many countries with the ultimate goal of making the cost of capital cheaper and thus enabling the development process through the increase of investment expenditures. The study of the role of tax incentives in investment spending has been made possible through the use of the neoclassical theory of optimum capital accumulation. This theory has been used in this article to indicate that incentive provisions may not always be operative at the margin, and thus having no effect in  the formulation of the value of depreciation allowances and further on the value of the implicit rental price of capital. Variations in the value of the user cost of capital can make an investment project cheaper or more expensive in relation to various time periods. This could not be proved for the case of Greece.