Taxation and the Cost of Capital in Hungary and Poland: A Comparison with Selected European Countries

International Monetary Fund

No 1990/123, IMF Working Papers from International Monetary Fund

Abstract: This paper compares the effective rates of taxation faced by a representative investor located in a major capital-exporting country for investments in machinery and buildings in nine capital-importing European countries. Poland and Hungary are found to have relatively high effective tax rates on equity-financed investment. The analysis suggests that both countries would benefit from streamlining capital cost recovery allowances and possibly lowering statutory corporate tax rates—as permitted by the revenue constraint—rather than providing tax preferences for foreign investors.

Keywords: WP; after-tax rate of return; cost of capital; depreciation rate; equity-financed investment; tax wedge; income tax; tax system; tax burden; nominal interest rate; Tax wedge; Corporate income tax; Corporate taxes; Depreciation; Stocks; Eastern Europe; Central and Eastern Europe (search for similar items in EconPapers)
Pages: 34
Date: 1990-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1990/123

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