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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
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Capital Cost Recovery
across the OECD
• A capital allowance is the amount of capital investment costs a business can
deduct from its revenue through the tax code via depreciation.
Ideally, countries should provide higher capital allowances, as they can boost
business investment which, in turn, spurs economic growth.
• The average of OECD countries’ capital allowances gradually decreased
between 2000 and 2017, followed by an increase between 2018 and 2021.
• The United Kingdom adopted a 130 percent super-deduction for plant and
equipment as part of a transition to a higher corporate tax rate.
• Rising inflation creates pressure on business investment, and Mexico is
currently the only OECD country that adjusts capital allowances for inflation.
• Several smaller OECD countries not only allow higher capital allowances but
also levy lower corporate income tax rates, making them more attractive for
Vice President of Global Projects
TAX FOUNDATION | 2
The ongoing economic uncertainty from the COVID-19 pandemic, supply chain disruptions, and
current inflationary pressures have highlighted the importance of investment. Policymakers around
the world are working to support critical infrastructure, the greening of the economy, and gear their
economic policies toward sustainable growth.
In 2019, prior to the pandemic, private sector investment in OECD countries outpaced public
investment by five to one. According to data