Journal of Tax Research

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In this paper, depreciation allowances stipulated in the Iranian tax laws are compared with those of some selected countries. Buildings, some assets used in the energy sector and intangible assets were selected among fixed assets for comparison purposes. The rationale behind selecting the above-mentioned assets consists of such issues as the large share of buildings in the total assets of most firms, the large share of the energy sector in the Iranian economy as well as the overall importance of intangible assets and their being neglected in most studies. It is difficult to compare depreciation allowances on a cross-country basis due to the diversity of calculation methods. In order for the comparison to be possible, the nominal percents of asset recovered costs in periods of 5 and 10 years were used, instead of rates or methods of depreciation. The results show that as compared with most of countries in question, the Iranian tax laws provide more incentives in cases of such assets as buildings, patents and licenses and weaker incentives for the energy sector assets and goodwill. The findings also indicate that the high inflation rates in Iran could reduce the incentive effects of depreciation allowances. The paper has ended up in the presentation of some policy recommendations and some proposals for the adjustment of depreciation rules in Iran.

Keywords: Tax incentives, fixed assets depreciation, depreciation allowances, comparative study

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