Types of Tax Concessions for Promoting Investment in Free Economic and Trade Areas

inflation losses through tax concession measures ceteris paribus takes place with lower
inflation rates, when t increases to 40%.

Table 1 Investment Promotion Effects of Tax Concessions without Inflation

Statutory coιporate tax rate for retained earnings (t in %)	Free depreciation	Accelerated depreciation	Investment tax allowance
Statutory coιporate tax rate for retained earnings (t in %)		Net present value
10	8.89	5.51	537
15	12.85	7.85	8.18
20	16.45	9.89	11.08
25	19.68	11.65	14.08
30	22.51	13.10	17.16
35	24.91	14.26	20.33
40	26.85	15.11	23.58
45	28.30	15.65	26.92
________50________	__________29.24__________	___________15.88___________	__________30.34___________
Assumptions	Equity finance; C = PVo = 333.33; Ao = 100; r = 10%; α σ = 50%; Ω = 5 years; β = 20%____________________		= 20%; Γ = 10 years;

Source: Own calculations

Table 2 Investment Promotion Effects of Tax Concessions with Inflation under

Given Corporate Tax Rates

Inflation rate	Free depreciation		Accelerated	depreciation	Investment tax allowance
(%)		tC (IE with various tax concessions -			FPo^sld)
	t = 20%	t = 40%	t = 20%	t = 40%	t = 20%	t = 40%
1	17.53	15.00	12.59	10.05	10.81	8.28
2	16.87	11.79	11.56	6.48	8.87	3.79
3	16.21	8.56	10.54	2.89	7.00	-0.65
4	15.55	5.30	9.53	-0.71	5.19	-5.05
5	14.88	2.02	8.53	-4.32	3.44	-9.41
6	14.21	-1.28	7.54	-7.96	1.75	-13.75
7	13.53	-4.62	6.55	-11.61	0.10	-18.06
8	12.85	-8.00	5.57	-15.28	-1.50	-22.34
9	12.17	-11.41	4.59	-18.98	-3.05	-26.62
10	11.47	-14.85	3.62	-22.71	-4.56	-30.33
11	10.78	-18.33	2.65	-26.46	-6.03	-35.14
12	10.08	-21.85	1.69	-30.25	-7.46	-39.39
13	9.38	-25.41	0.73	-34.07	-8.86	-43.65
14 .	8.67 .	-29.02 .	-0.23 .	-37.92 .	-10.22 .	-47.92 .
. . 25	. 0.55	. -72.44	. -10.58	. -83.57	. -23.60	. -96.60
Assumptions	Equity finance; C = PVo = 333.33; Ao = 100; r Ω = 5 years; β = 20%			= 10%; α = 20%; Γ = Γ* =10 years; σ = 50%;

Source: Own calculations

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