IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/08-77.html
   My bibliography  Save this paper

Corporate Income Tax Competition in the Caribbean

Author

Listed:
  • Koffie Ben 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.

Suggested Citation

  • Koffie Ben Nassar, 2008. "Corporate Income Tax Competition in the Caribbean," IMF Working Papers 08/77, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/77
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21820
    Download Restriction: no

    References listed on IDEAS

    as
    1. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
    2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    3. Wolfgang Eggert & Andreas Haufler, 2006. "Company-Tax Coordination cum Tax-Rate Competition in the European Union," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(4), pages 579-601, December.
    4. Sebastian Sosa, 2006. "Tax Incentives and Investment in the Eastern Caribbean," IMF Working Papers 06/23, International Monetary Fund.
    5. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    6. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
    7. Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "Why has the UK corporation tax raised so much revenue?," Fiscal Studies, Institute for Fiscal Studies, vol. 25(4), pages 367-388, December.
    8. Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December.
    9. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
    10. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, vol. 29(2), pages 133-172, March.
    11. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 567-586.
    12. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers W03/03, Institute for Fiscal Studies.
    13. Amrita Dhillon & Myrna Wooders & Ben Zissimos, 2007. "Tax Competition Reconsidered," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 391-423, June.
    14. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    15. Michael P. Devereux & Rachel Griffith, 1998. "The Taxation of Discrete Investment Choices," Keele Department of Economics Discussion Papers (1995-2001) 98/08, Department of Economics, Keele University.
    16. Mark Rider, 2004. "Corporate Income Tax and Tax Incentives," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0428, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    17. Alexander Klemm, 2004. "A minimum rate without a common base?," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 39(4), pages 186-189, July.
    18. Alfons J. Weichenrieder, 2005. "(Why) Do we need Corporate Taxation?," CESifo Working Paper Series 1495, CESifo Group Munich.
    19. Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 289-296.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Majid FESHARI & Ali AKBAR TAGHIPOUR & Mojtaba VALIBEIGI, 2016. "Tourism Demand And Tax Relationship In Islamic Regions," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 99-106, December.
    2. repec:hrs:journl:v:viii:y:2016:i:3:p:99-106 is not listed on IDEAS
    3. Martin Bes & Daniel Alvarez-Estrada, 2013. "Promoting Growth in the Caribbean : Tax Incentives in Theory and in Practice
      [Promoción del crecimiento en el Caribe : incentivos fiscales en teoría y en la práctica]
      ," World Bank Other Operational Studies 16619, The World Bank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:08/77. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi). General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.