The concept of the user costs of capital, or its shadow price, plays a prominent role in the neoclassical theory of investment and constitutes a convenient vehicle for evaluating effects of corporate taxation on private business investment. This paper presents a derivation of the user cost of capital for Austria for the period of 1976 to 2000 and discusses methodological and statistical issues involved. Special care is taken to ensure the correct representation of the major fiscal instruments of Austria's system of corporate taxation in place at that time. These instruments comprise the business tax, the corporation tax, the depreciation allowance and the investment tax allowance. The spectrum of capital goods considered here encompasses machinery, vehicles, buildings and intangible capital goods. In addition, a comprehensive sensitivity analysis of the user cost of capital with respect to the aforementioned fiscal instruments is performed. Its results, coupled with empirical evidence on the sensitivity of private investment to user costs, provide the basis for fiscal policy evaluation in the field of corporate taxation. The basic measure used in the sensitivity analysis is semi-elasticity. The main findings can be summarised as follows: • Austria's corporate tax system is not investment-neutral, and its impact depends on the financial structure. Legislation particularly favours funding through borrowing. • A 1 percentage point increase in the business tax rate typically impacts as a 0.34 percent decrease in investment made by the private sector. • The impact of the same increase in corporation tax is markedly weaker due to a fiscal provision that allows deducting interest payments on debt, amounting, on average, to a 0.10 percent decrease in investment. In the benchmark case of investment funded exclusively by retained profit, the effect makes up –0.54 percent. • An increase in the rate of the investment tax allowance of the same magnitude induces, on average, 0.36 percent more investment. • A 1 percentage point increase in the rate of depreciation allowance provides the strongest stimulus for private business investment, which is quantified at 2.52 percent. All the above effects generally increase with the life span of the capital good. This certainly applies to depreciation allowance, taxes and to a lesser extent to investment allowance.