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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
· 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 2020.
· To incentivize business investment following the COVID-19 pandemic, several
OECD countries have implemented accelerated depreciation—and in some
cases full expensing—for various asset types.
· Chile now temporarily allows full expensing of fixed assets and 100 percent
amortization of intangibles. This makes Chile the third OECD country
after Estonia and Latvia that effectively allows full expensing of industrial
buildings, machinery, and intangibles.
· Several smaller OECD countries not only allow higher capital allowances but
also levy lower corporate income tax rates, making them more attractive for
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The ongoing COVID-19 pandemic has once again highlighted the importance of investment. For
example, billions of dollars of investment in the broadband sector made it possible to respond to
soaring internet demand when the pandemic first hit. On the other hand, a lack of investment in
medical equipment and supplies caused immense difficulties, particularly duri