The article presents the effects of inflation on incentives to invest. The models of D. W. Jorgenson (capital cost) and A. J. Auerbach (effective tax rate) are the starting point of the article. Based on these models a negative effect of inflation on capital cost in an enterprise can be determined being the result of a negative impact of tax regulations in the period of inflation. The point is that taxes are set on a nominal income rather than a real one, which, ultimately, raises the effective tax rate and simultaneously the cost of capital utilization. At the same time, the models show that liquidation of the taxation system imperfections will shift the negative impact of inflation on capital cost. One may, however, ask whether this is a sufficient condition. The article proves that when loans are transferred to enterprises through financial intermediaries inflation may still affect adversely capital cost and, therefore, incentives to invest themselves despite an enhanced taxation system.