We introduce the concept of weak tax neutrality which establishes that the relationship
between the tax rate and the user cost of capital may be non-monotonic. We show that most
existing corporate tax systems allow for weak neutrality. That is, given the tax allowances permitted
by these systems, it is possible that neutrality may arise for at least one positive corporate tax rate.
Moreover, we show the practical relevance of weak neutrality in realistic situations where there are
several asset types and heterogeneous levels of firms’ debt ratios.