Corporate Income Tax Competition in the Caribbean

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Corporate Income Tax Competition in the Caribbean

Author Info

Koffie Nassar

Abstract

Motivated by the concern that corporate income tax (CIT) competition may have eroded the tax base, this paper calculates average effective tax rates to measure the impact of CIT competition, including the widespread use of tax holidays, on the tax base for 15 countries in the Caribbean. The results not only confirm erosion of the tax base, but also show that CIT holidays must be removed for recent tax policy initiatives (such as accelerated depreciation, loss carry forward provisions, and tax harmonization) to be effective. These findings suggest that the authorities should either avoid granting CIT holidays or rely more on other taxes (including consumption taxes such as the value-added tax) in order to broaden the tax base.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/77.

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Length: 22 pages
Date of creation: 28 Mar 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/77

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This paper has been announced in the following NEP Reports:

NEP-ALL-2008-05-10 (All new papers)
NEP-PBE-2008-05-10 (Public Economics)
NEP-PUB-2008-05-10 (Public Finance)

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