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Investment Stimulation by a Depreciation Mechanism

  • Arkin Vadim


  • Arkina Svetlana


  • Slastnikov Alexander


The authors investigate the possibility of utilizing the depreciation mechanism to provide incentives for undertaking investment in the real sector of the Russian economy. The proposed model of investor's behavior under risk and uncertainty considers a wide range of tax instruments The authors derive the optimal timing rule for investment and depreciation policy which maximizes tax payments into the regional budget. A comparative analysis of the former and new profit taxation systems is carried out. The authors discover interdependence of tax holidays and accelerated depreciation, and study the replacement of property tax by real estate tax. They investigate the possibilities of compensating for risk by reducing profit tax rate and changing depreciation policy, and prove the existence of risk zones for which these fiscal mechanisms are non-effective.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 02-05e.

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Length: 82 pages
Date of creation: 21 Feb 2003
Date of revision:
Handle: RePEc:eer:wpalle:02-05e
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