The Impact of Investment Incentives: Evidence from UK Corporation Tax Returns

Giorgia Maffini, Jing Xing and Michael Devereux

American Economic Journal: Economic Policy, 2019, vol. 11, issue 3, 361-89

Abstract: Using UK corporation tax returns, we provide evidence on the effects of accelerated depreciation allowances on investment, exploiting exogenous changes in the qualifying thresholds for first-year depreciation allowances (FYAs) in 2004. The investment rate of qualifying companies increased by 2.1–2.5 percentage points relative to those that did not qualify. We exploit variation in the timing of tax payments to show that this effect is primarily due to the change in the cost of capital, rather than a relaxation of financial constraints. Discontinuity at notches in the cost of capital at the qualifying thresholds does not affect our results.

JEL-codes: D25 G31 H25 H32 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pol.20170254
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Citations: View citations in EconPapers (50)

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Working Paper: The impact of investment incentives: evidence from UK corporation tax returns (2016)
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