| Abstract: | The effects of recent tax changes on the profitability and feasibility of machinery investment and on the incentive for the substitution of labour by machinery are studied. Using two examples, variations in tax, interest and inflation rates are also evaluated, as is the effect of the consideration of tax bands. The results indicate that not only has the change in capital allowances made machinery investment less favourable, but so also does the use of tax bands, especially for more expensive items. If interest and inflation rates decline in the longer term the profitability of machinery investment will deteriorate, although feasibility may improve. |
