The provisions of the Income Tax Act relating to capital cost allowances have had and are having a profound impact on the operations of the individual corporation and the national economy as a whole. [...]

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Canada has pursued during the postwar period a policy of accelerated capital cost allowances to stimulate private investment. Faster write offs increase a firm's cash flows and hence internal funds available for investment. These allowances reduce government revenues since taxes are deferred. These deferred taxes have grown rapidly and now more attention is being paid to the effects of tax incentive devices on investment and on government revenues. / In the thesis non-neoclassical models of investment are employed for an analysis of investment in two manufacturing industries. One model emphasizes the interdependence of the investment and financing decisions of firms. Both sales and external finance are significant determinants of investment expenditures. The main conclusion of the thesis is that accelerated write offs have played a limited role in financing investment. Instead, firms relied more on external borrowing and other financing methods which confer larger tax benefits than faster write offs.

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