An announcement by the government that they will decrease corporate marginal tax rates in the future would increase the capital cost allowance (CCA)tax shield.

Question

Quizplus · Accepted Answer

The announcement of a decrease in corporate marginal tax rates would not directly affect the capital cost allowance (CCA) tax shield. The CCA tax shield is determined by the depreciation expenses and the tax rate, so a change in the tax rate would not affect the CCA. However, a decrease in corporate tax rate may indirectly affect the CCA tax shield as it may increase the after-tax cash flow available for investment, which could result in an increase in capital investments and ultimately increase the CCA tax shield.

An Announcement by the Government That They Will Decrease Corporate