Causes, Benefits, and Risks of Business Tax Incentives
AbstractThis paper provides an updated overview of tax incentives for business investment. It begins by noting that tax competition is likely to be a major force driving countries' tax reforms, and discusses tax incentives as a possible response to this. This is complemented by other arguments for and against tax incentives, and by an illustrative analysis of different incentives using effective tax rates. Findings from the empirical literature on tax incentives are also presented. Based on the overview of theoretical and empirical findings, the paper then suggests a matrix of criteria to determine the usefulness of different tax incentives depending on a country's circumstances.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 09/21.
Date of creation: 01 Jan 2009
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
Other versions of this item:
- Alexander Klemm, 2010. "Causes, benefits, and risks of business tax incentives," International Tax and Public Finance, Springer, vol. 17(3), pages 315-336, June.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mintz, Jack M, 1990. "Corporate Tax Holidays and Investment," World Bank Economic Review, World Bank Group, vol. 4(1), pages 81-102, January.
- Fuest, Clemens & Huber, Bernd & Mintz, Jack, 2005. "Capital Mobility and Tax Competition," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(1), pages 1-62, December.
- Devereux, Michael P & Griffith, Rachel, 2002.
"Evaluating Tax Policy for Location Decisions,"
CEPR Discussion Papers
3247, C.E.P.R. Discussion Papers.
- Alan J. Auerbach & James R. Hines Jr., 1988.
"Investment Tax Incentives and Frequent Tax Reforms,"
NBER Working Papers
2492, National Bureau of Economic Research, Inc.
- Auerbach, Alan J & Hines, James R, Jr, 1988. "Investment Tax Incentives and Frequent Tax Reforms," American Economic Review, American Economic Association, vol. 78(2), pages 211-16, May.
- Auerbach, A.J. & Hines, Jr.J.R., 1988. "Investment Tax Incentives And Frequent Tax Reforms," Papers 135, Princeton, Woodrow Wilson School - Public and International Affairs.
- Alexander Klemm, 2004. "A minimum rate without a common base?," Intereconomics: Review of European Economic Policy, Springer, vol. 39(4), pages 186-189, July.
- David F. Bradford, 1979.
"The Incidence and Allocation Effects of a Tax on Corporate Distributions,"
NBER Working Papers
0349, National Bureau of Economic Research, Inc.
- Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
- Haufler, Andreas & Schjelderup, Guttorm, 2000.
"Corporate Tax Systems and Cross Country Profit Shifting,"
Oxford Economic Papers,
Oxford University Press, vol. 52(2), pages 306-25, April.
- Haufler, A. & Schjelderup, G., 1999. "Corporate Tax Systems and Cross Country Profit Shifting," Papers 1/99, Norwegian School of Economics and Business Administration-.
- Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization," IMF Working Papers 09/157, International Monetary Fund.
- Eckhard Janeba & Michael Smart, 2001.
"Is Targeted Tax Competition Less Harmful than its Remedies?,"
CESifo Working Paper Series
590, CESifo Group Munich.
- Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer, vol. 10(3), pages 259-80, May.
- Bloom, Nick & Griffith, Rachel & Van Reenen, John, 2002.
"Do R&D tax credits work? Evidence from a panel of countries 1979-1997,"
Journal of Public Economics,
Elsevier, vol. 85(1), pages 1-31, July.
- Nicholas Bloom & Rachel Griffith & John Van Reenen, 2007. "Do R&D Tax Credits Work? Evidence from a Panel of Countries 1979-1997," Discussion Papers 07-020, Stanford Institute for Economic Policy Research.
- Ruud de Mooij & S. Ederveen, 2001.
"Taxation and foreign direct investment; a synthesis of empirical research,"
CPB Discussion Paper
3, CPB Netherlands Bureau for Economic Policy Analysis.
- de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer, vol. 10(6), pages 673-93, November.
- Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
- Alexander Klemm, 2008. "Effective Average Tax Rates for Permanent Investment," IMF Working Papers 08/56, International Monetary Fund.
- Bond, Eric W, 1981. "Tax Holidays and Industry Behavior," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 88-95, February.
- Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
- Alexander Klemm & Dennis P. J. Botman & Reza Baqir, 2008. "Investment Incentives and Effective Tax Rates in the Philippines:A Comparison With Neighboring Countries," IMF Working Papers 08/207, International Monetary Fund.
- Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
- A. Klemm & S. Van Parys, 2010.
"Empirical Evidence on the Effects of Tax Incentives,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
10/673, Ghent University, Faculty of Economics and Business Administration.
- Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer, vol. 19(3), pages 393-423, June.
- Alexander Klemm & Stefan van Parys, 2009. "Empirical Evidence on the Effects of Tax Incentives," IMF Working Papers 09/136, International Monetary Fund.
- Ruben Atoyan, 2010. "Beyond the crisis: revisiting emerging Europe’s growth model," Financial Theory and Practice, Institute of Public Finance, vol. 34(4), pages 329-356.
- Jerónimo Roca, 2010. "Evaluation of the Effectiveness and Efficiency of Tax Benefits," IDB Publications 12358, Inter-American Development Bank.
- Danielova, Anna & Sarkar, Sudipto, 2011. "The effect of leverage on the tax-cut versus investment-subsidy argument," Review of Financial Economics, Elsevier, vol. 20(4), pages 123-129.
- Masaaki Suzuki, 2013. "Corporate Effective Tax Rates in Asian Countries," KIER Working Papers 875, Kyoto University, Institute of Economic Research.
- Ruben Atoyan, 2010. "Beyond the Crisis: Revisiting Emerging Europe's Growth Model," IMF Working Papers 10/92, International Monetary Fund.
- Bird, Richard M. & Zolt, Eric M., 2011. "Dual Income Taxation: A Promising Path to Tax Reform for Developing Countries," World Development, Elsevier, vol. 39(10), pages 1691-1703.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.