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1、技术经济学英文版演示文稿C41 Still waters run deep.流静水深流静水深,人静心深人静心深 Where there is life,there is hope。有生命必有希望。有生命必有希望4.1 Basic Tax StructureIn this section,we discuss two important concepts which are common to most types of tax analysis.The only requirement is that the business invests in durable(lasting more t
2、han one year)goods.For an exclusively service industry requiring no investment in durable goods,the concept of depreciation may not be relevant.Otherwise understanding of depreciation and income taxes is almost a universal requirement for a proper economic evaluation of any project.4.1.1 Depreciatio
3、nDepreciation in literal sense means a decrease in value.For example,you buy a car today,-In economic analysis,depreciation has a different meaning.Realizing that the existence of a corporation is perpetual,depreciation is treated as a replacement cost.That is,if you buy a piece of equipment which h
4、as a useful life greater than one year,the assumption is that you will have to replace that piece of the equipment at the end of its useful life.Therefore,some money has to be set aside during the useful life so that the equipment can be replaced.This yearly replacement cost is called depreciation.I
5、n other words,it is an allocation(分分配配)of the cost of the equipment spread over its useful life.The government allows the corporation to set aside this money for future replacement by not taxing this money.Although use of depreciation for durable equipment is the most common,it is also used for othe
6、r properties.To generalize,a property can be depreciated if it satisfies the following characteristics:*It must be used in business or production of income.*It must have a life longer than one year.*It must be something that wears out(磨磨损损),decays(腐腐烂烂),becomes obsolete(陈陈旧旧)or loses value from natu
7、ral causes.These characteristics are most appropriate for(适适 于于)equipment;however,they can also be applied to building,patents and copyrights.Investment in such property is called a capitalized cost.In production operations,this cost will include costs of casing(下下 套套 管管、固固 井井),piping,tank batteries
8、,pumps,compressors,buildings,etc.Considering that these costs are incurred over tangible items,sometimes,these costs are also called tangible costs.Costs related to patents and copyrights are intangible costs;however,they still need to be capitalized.In contrast,the costs incurred for regular mainte
9、nance,upkeep and utilities for running the equipment,including the labor costs,are considered operating costs and can be deducted from the operating revenue in the same year for tax purposes.Although the distinction between the capitalized costs and the operating costs is clear in most instances,in
10、some instances the distinction is difficult to achieve.In the context of petroleum industry,a good example would be the costs of drilling a well.These costs include:*Costs related to agreements with drilling contractors.*Surveys(调查调查)related to location of a well.*Road costs and dirt(污垢污垢)work relat
11、ed to well location.*Rig(钻机钻机)transportation and set up costs.*Fuel,water,drilling mud costs.*Labor costs including supervisors(主主管管人人),well site geologists(地质师地质师)and testing of well.*Stimulation（激励）（激励）costs.*Cementing(水泥水泥)costs(does not include casing).*Surface damage（赔偿）（赔偿）costs.Since the dril
12、ling costs are incurred before the actual production begins,they cannot be considered operating costs.On the other hand,the costs for labor,utilities,drilling mud,and rig rental cannot be considered tangible costs.How to treat these costs is indeed a legislative decision.Different countries have dif
13、ferent rules with respect to categorizing the costs of drilling.Before we understand different methods for calculating the depreciation,we need to understand some basic definitions.Cost Basis-B0Cost basis represents the cost of acquiring(获获 得得)a property.This is the total cost which will be capitali
14、zed over(从从头头到到尾尾)the property.This cost includes the cost of the property as well as all the other incidental expenses(杂杂 费费)such as installation,freight(运运 费费),and site preparation.Book Value(Bk)Book value is cumulative depreciation subtracted from the cost basis of the property.In year k,the book
15、 value can be defined as,(4.1)where Dj is the depreciation in year j.The amount depreciated in each year will depend upon the method used.Salvage ValueSalvage value is the price obtained from the sale of property at the end of its useful life.Repair CostsRepair costs are costs related to keeping the
16、 property in an ordinary efficient operating condition.Capitalized CostsCapitalized costs related to the existing(现现有有的的)property are costs related to alterations(改改 造造),additions or improvements that increase propertys useful life or value or make it adaptable(适应适应)for a different use.The distincti
17、on between repair costs and capitalized costs for an existing property is useful because repair costs can be deducted as operating costs,whereas,capitalized costs will have to be depreciated.This difference can have significant(重重要要的的)tax consequences as we will examine in the next section.Useful Li
18、feThe time over which property is kept in productive use in a business.Tax Life The period of time over which depreciation is calculated to offset(抵抵消消、冲冲销销)taxable income.This period is usually shorter than the useful life of the property.It is determined by the tax code of a particular country dep
19、ending on the type of property.For example,in the United States the tax life can be as short as 3 years for taxies and race horses,and as long as 31.5 years for non-residential（住宅）（住宅）real property.Example 4.1 An oil company ordered a new submersible pump for improving production from an old well.Th
20、e cost of the pump is$20,000.The company will have to pay 7%sales tax on the pump.In addition,shipping costs are$300,and the installation costs are$l,000.What is the cost basis for the pump?SolutionIn calculating the cost basis,any cost associated with purchase,shipping,installation and site prepara
21、tion will have to be included.Therefore,the cost basis for the pump is,CostofPump$20,000SalesTax(7%)1,400ShippingCost(运费)300Installationcost1,000CostBasis$22,700In calculating cost basis,it is critical that all the costs including some non-monetary transactions(交交 易易)are included.One such example of
22、 non-monetary transaction would be trade-in(打打折折)benefit.If you trade in(抵抵价价购购物物)an oil pump for a new pump so that the cost of the new pump is$18,000,the cost will not be reduced by$2,000.Since the trade in value is considered to be$2,000,it will be added in the cost basis as a separate item.Strai
23、ght Line Depreciation-SLDStraight line depreciation is one of the easiest methods of estimating the depreciation.Mathematically,the depreciation is calculated as.(4.2)where Dk is the depreciation in year k,B0 is the cost basis,S is the salvage value at the end of tax life and n is the number of year
24、s of tax life.Alternately,depreciation can also be calculated as,(4.3)where Bk-1 is the book value at the end of period k-l.Both equations would give the same result.The book value is calculated using Eq.4.l.A common term,S,in both Eq.4.2 and Eq.4.3 is difficult to estimate at the beginning of taxab
25、le life for many properties.Many tax codes simplify the calculations by assuming that the salvage value is zero at the end of tax life.Example 4.2 Consider a piece of equipment purchased for$5,000.If the tax life is five years,and the salvage value is zero,calculate the depreciation schedule over th
26、e five year period.YearDepreciationBookValueattheBeginningoftheYear11,0005,00021,0004,00031,0003,00041,0002,00051,0001,000Declining Balance Depreciation-DBD The amount of depreciation in each year is a certain percentage of the book value at the end of previous year.This percentage is constant throu
27、ghout the tax life of the property.This percentage is usually defined as the ratio of declining balance rate to the tax life.For example,if declining balance rate is 200%and the tax life of a property is 5 years,then the percentage of the book value used as depreciation is 200%/5=40%per year.If we d
28、enote this percentage change in fraction as R,we can calculate the depreciation in year k as,(4.4)where the book value at the end of year k can be calculated as.(4.5)Substituting Eq.4.5 in Eq.4.4,we can calculate the depreciation in year k as,(4.6)where B0 is the cost basis.The declining balance rat
29、e can vary between 100%to 200%(double declining balance);the most common value being 200%.Example 4.3 Using the same information as in Example 4.2 and using the double declining balance method estimate the depreciation schedule.SolutionFor year one.depreciation is calculated as(using Eq.4.6),D1=RB0w
30、here R is 200%/5=40%,and B0=$5,000.Substituting,D1=0.45,000=$2,000The book value at the end of year l can be calculated using Eq.4.5,B1=B0(1-R)1=5,000(1-0.4)=$3,000Similarly,for year two,D2=RB0(1-R)2-1=0.4*5,000(1-0.4)=$l,200Or,using Eq.4.4,.D2=RBk-1=0.4(3,000)=$1,200The book value is,B2=(5,000)(1-0
31、.4)2=$l,800Calculations can be repeated for other years as well,as shown in the table below:After five years,the total amount of depreciation allowed is$4,61l which is not equal to the cost of the equipment.This is one of the major disadvantage declining balance method.That is,the cost of the equipm
32、ent cannot be recovered fully over the tax life.Only at very large times can the total cost be fully recovered.YearBookValueDepreciation15,0002,00023,0001,20031,80072041,0804325648259Total$4,611Sum of Years Digits Depreciation-SYDDThis method also results in a larger depreciation at the beginning of
33、 a useful life than the straight line depreciation method.It is not a very common method used for depreciation.To calculate the depreciation using this method,we first need to know the sum of years digits.This sum represents the sum of all the years in a tax life.For example,if n is the tax life of
34、a property,sum is calculated as,sum=l+2+3+.+n (4.7)Alternately,we can also calculate the sum as,(4.8)Depreciation in year k can be calculated as,(4.9)We can write Eq.4.9 as,(4.10)Book value can be calculated using Eq.4.1.Example 4.4 Using the same information as in Example 4.2,calculate the deprecia
35、tion schedule using the sum of years digits depletion.SolutionUsing Eq.4.10,depreciation in year 1 can be calculated as,For year two,The book value after year two is.Similar calculations can be done for other years.Unlike declining balance method,sum of years digits method allows the depreciation of
36、 the entire cost of an asset.YearDkBookValue11,6673,33321,3332,00031,0001,000466733353330TotalDepreciation$5,000Unit of Production DepreciationThis method of estimating the depreciation is based on the number of units produced by an equipment rather than the life of the equipment.It is assumed that
37、the total number of units that can be produced from the equipment is known.The amount of depreciation using this method can be calculated as,(4.1l)where(u)is the number of units produced in a given year,(U)is the total number of units that can be produced from the unit,(C)is the cost of the equipmen
38、t,and(S)is the salvage value.Declining Balance and Straight line DepreciationTo remove the major disadvantage of the declining balance method,i.e.,not being able to recover the entire cost of an asset;at the same time,to allow for the rapid depreciation as calculated by the declining balance method,
39、a combination of declining balance and a straight line method is used.This method allows the calculation of depreciation using both the declining balance and the straight line methods and switching from one method to another when method predicts a higher depreciation than the other method.Recall tha
40、t straight line depreciation can be calculated as,(4.3)and the declining balance depreciation is calculated as,(4.4)For each year,we compute the depreciation using both methods and choose the value which is higher.That is.if,(4.12),we select the declining balance methodif,(4.13),we select the straig
41、ht line methodIf we assume that the salvage value is zero,we can simplify Eq.4.13 to write,Eq.4.14 provides a condition for switching to a straight line method.For example,if n=5,and R=0.4,k 3.5 to switch to a straight line method.That is,we will switch in year 4 to a straight line method.The follow
42、ing example illustrates the technique.Example 4.6 Using the same information as in Example 4.2,calculate the depreciation schedule using the combination(double declining and straight line)method.Assume double declining balance(DDB).YearDepreciation(Decliningbalance)Depreciation(StraightLine)BookValu
43、eAtTheEndSelectedDepreciation12,0001,0003,0002,00021,2007501,8001,20037206001,080720443254054054052165400540Declining Class Account DepreciationFor equipment which is assembled from various components,it is difficult to depreciate individual components separately.An example would be a pipeline netwo
44、rk or a gas processing plant.It is difficult to keep track of a valve or a flange or a tee in a pipeline network;and depreciate it individually.To minimize this,accounting complexity another method commonly used for depreciation is the declining class account(DCA)depreciation.This method is based on
45、 whole investment perpetual declining class account(DCA)schedule.The method is relatively easy to use.Assuming that the average tax life of the equipment is known,the depreciable amount in a given year is calculated as,(4.15)where Bk-l is the book value at the end of previous year and Ak is the sum
46、of capital expenditures during year k.Depreciation in year k is then calculated as,(4.16)where R is the declining balance ratio.This equation is continued to be used so long as the equipment is used for a given purpose.If any part of the capital equipment is disposed（处理、处置）（处理、处置）,the income receive
47、d is treated as a taxable income.4.l.2 Income Taxes In general terms,tax is a way by which authorities share part of the income of an individual or a corporation.These authorities may be federal government,individual states,local municipalities,counties and school districts.Taxing the income can tak
48、e several forms;the most common being income tax which is levied on the difference between the gross revenue and allowed deductions for tax purposes.Other types of taxes include property taxes which are based on the value of real estate:sales taxes which are based on the price of goods;luxury taxes
49、which are based on items which are not considered necessities;entertainment(招招 待待)taxes which are based on entertainment expenses;and value added taxes which are based on the difference in a value of a good as it passes from one party to another.There may be other types which we have not included he
50、re.In this section,we will concentrate on income taxes.Income taxes in most instances are levied by either federal or central government and the local or state government.The laws governing the calculations of income tax are extremely complex and replete with exceptions.Therefore,rather than conside