Dr. Andreas Löffler (Free University Berlin) “Faustmann and Taxes.”

Abstract

So far, the question of the optimal rotation period has not often been analysed under consideration of tax aspects. We concentrate on the conditions in Germany and formulate a general model with which the consideration of an personal income tax (Einkommensteuer) can be made in the forestry calculation. On this basis we can show that the interest rate to be applied in forestry always decreases with the inclusion of taxes, while the optimal rotation period always increases. The use of realistic numerical values for interest and tax rate can lead to a considerable increase in the optimal rotation period.