Economic Analysis: Theory and Practice
 

Modeling an investment process from taxation perspective under inflation

Vol. 17, Iss. 8, AUGUST 2018

Received: 24 May 2018

Received in revised form: 8 June 2018

Accepted: 26 June 2018

Available online: 29 August 2018

Subject Heading: INVESTMENT ANALYSIS

JEL Classification: В23, С02, С58, G17

Pages: 1476–1489

https://doi.org/10.24891/ea.17.8.1476

Sechenova M.V. St. John the Theologian's Moscow Orthodox Institute, Moscow, Russian Federation
rsechenova@mail.mipt.ru

https://orcid.org/0000-0002-0897-2862

Importance The article discusses a model to evaluate the performance of investment projects taking into account taxation in the context of inflation.
Objectives The aim is to develop formal tools for investment project efficiency evaluation to unveil the impact of various taxation schemes on project performance under main types of inflation.
Methods The study draws on methods of systems analysis, economic-mathematical modeling, financial mathematics, statistical economics, and mathematical analysis.
Results The paper provides a detailed analysis of the impact of inflation on tax payments under various tax regimes when evaluating the investment project performance. I developed a method to calculate indicators of project performance under the main types of inflation, using an analytical model that considers tax expense under various tax treatment.
Conclusions The analytical model enables to elaborate the generalizing record of formal tools for investment process efficiency evaluation as applied to the specifics of tax payments in the investing activity of some enterprises. Calculations of investment project efficiency in the conditions of inflation in nominal and real cash flows are not equivalent because of the existence of non-indexed taxes and amortization charges. When calculating in real prices, it is necessary to consider this adjustment.

Keywords: investment project, performance evaluation, cash flow, taxation, inflation

References:

  1. Zuev G.M., Sechenova M.V. [Evaluation of investment activity taking into account taxation]. Vestnik Moskovskogo universiteta. Seriya 6. Ekonomika = Moscow University Economics Bulletin, 2009, no. 4, pp. 55–63. (In Russ.)
  2. Sechenova M.V. [Analytics of investment evaluation taking into account cash flow discreteness]. Ekonomicheskii analiz: teoriya i praktika = Economic Analysis: Theory and Practice, 2009, no. 28, pp. 26–34. URL: https://cyberleninka.ru/article/v/analitika-investitsionnogo-otsenivaniya-s-uchetom-diskretnosti-denezhnyh-potokov (In Russ.)
  3. Iverson K.E., Falkoff A.D., Sussenguth E.H. A Formal Description of SYSTEM/360. IBM Systems Journal, 1964, vol. 3, no. 2, pp. 198–262.
  4. Bierman H.Jr., Smidt S. Kapitalovlozheniya: ekonomicheskii analiz investitsionnykh proektov [The Capital Budgeting Decision: Economic Analysis of Investment Projects]. Moscow, YUNITI-DANA Publ., 2003, 632 p.

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