Governments may want to prevent the shrinking of the business base of their economy, so they may tax withdrawals of capital.

Governments may want to stimulate the exploration for O&G. They may allow companies to "flow-through" the exploration expense to the shareholders so it can be redeployed.

REITs may also flow through the depreciation expense they do not need to shareholders. It may be decades before the property is sold and taxes payable. It is better to give the excess cash and the tax write-off to the shareholders.

Since the ROC shrinks the business and represents a return of the investors' own money, the ROC payment received may not be taxed as income. Instead it may reduce the cost base of the asset. This results in higher capital gains when the asset is sold, but defers tax.

There will be tax consequences that are specific to individual countries. As examples only:

Cash flows do not measure income. They measure only cash flows.

Depreciation, depletion and amortization cannot be ignored as "non-cash expenses". They are valid allocations of a one-time cash flow over the time period that the asset helps generate revenues.

In the process of normalizing rates of return between different investment opportunities, ROC should not be included in the consideration of 'income' or 'dividends'.

Time value of money[edit]

Some critics dismiss ROC or treat it as income, with the argument that the full cash is received and reinvested by the business or by the shareholder receiving it. It thereby generates more income and compounds. Therefore, ROC is not a "real" expense.

Recovery of capital doctrine

Return on capital