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Taxes Impact on Private Investment

Author

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  • Samvel S. Lazaryan

    (Financial Research Institute, Moscow 127006, Russia)

  • Mariya A. Chernotalova

    (Financial Research Institute, Moscow 127006, Russia)

Abstract

The article analyzes methods of empirical estimation of tax changes impact on private investment and possible difficulties of such empirical evaluation. The authors also review results of empirical studies dedicated to impact of taxes on firms’ investment. In addition, the authors consider several aspects of impact of already conducted or only potential tax changes on private investment in Russia. There are two ways how tax changes influence investment of companies: the first one — they change benefits and costs of investment decision; the second one — they influence cash flows of the company, effectively changing feasibility of investment. Estimating general effect of a certain tax change calls for using a general equilibrium model, but most studies focus on partial equilibrium effects. The main problem of empirical analysis of impact of taxes on investment is endogeneity of the tax system. If one addresses this and other issues properly, he is likely to conclude that providing investment tax credits, allowing accelerated depreciation, lowering profit tax rate, introducing positive difference between tax rate on distributed and undistributed profits and reducing overall tax burden positively affect investment of companies.

Suggested Citation

  • Samvel S. Lazaryan & Mariya A. Chernotalova, 2017. "Taxes Impact on Private Investment," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 71-84, June.
    • Handle: RePEc:fru:finjrn:170306:p:71-84
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    References listed on IDEAS

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    1. Natalia B. Boldyreva & Liudmila G. Reshetnikova & Elena A. Tarkhanova & Zhanna V. Pisarenko & Svetlana A. Kalayda, 2020. "The Impact of Tax Preferences on the Investment Attractiveness of Bonds for Retail Investors: The Case of Russia," JRFM, MDPI, vol. 13(4), pages 1-11, April.

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    More about this item

    Keywords

    tax policy; investment of firms; investment tax credit; depreciation; profit tax;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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