ABSTRACT
Introduction Three stylised facts summarise the fiscal treatment of investment during the last half century. The first is the variety of instruments deployed: successive Chancellors of the Exchequer have shown much ingenuity in designing new policy tools, and new labels for old ones. Second, if these various instruments can legitimately be represented on a uniform scale by computing their effects on the present value of capital costs, the stance as well as the form of fiscal policy has varied substantially: in 1958 the post-tax cost of capital (for investment in machinery) exceeded its pre-tax level by 26 per cent; in 1967, the net effect of the tax system and investment grants (in manufacturing) was to reduce the pre-tax cost of capital by 9 per cent. Finally, there has been a marked reduction in the frequency of change. Fiscal provisions affecting investment were altered in fourteen of the eighteen years ending in 1973. Thereafter one major reform was initiated in 1984, and there were two trivial changes in the early 1990s.
