Using Tax Incentives to Compete for Foreign Investment : Are They Worth the Costs?

The book contains complementary essays on the use of tax incentives, to attract foreign direct investment (FDI). The first essay presents results of the authors' original research, and explores FDI, and issues of tax incentives, in the context of Indonesia. Their results mostly support the arguments made against incentives, particularly they find little evidence that when Indonesia eliminated tax incentives, there was any decline in the rate of FDI into the country. Similarly, the second essay surveys the research of others on the same topic, and pertaining to the same issues discussed in the first essay. They show that results of other researchers, are generally consistent with the findings of the research in Indonesia, notably that tax incentives, neither affect significantly the amount of direct investment that takes place, nor usually determine the location to which investment is drawn. Nevertheless, recent evidence has shown that when factors such as political, and economic stability, infrastructure, and transport costs are more, or less equal between potential locations, taxes may exert a significant impact. This is evidenced by the growing tax competition in regional groupings (i.e., the European Union) or, at the sub-regional level within one country (i.e., the United States). Both essays provide a basis for much more sophisticated analysis by policymakers than previously, and, both are important because they question governments' institutional arrangements that create agency problems with respect to tax incentive policies.

Bibliographic Details

Main Authors:	Wells, Louis T., Jr., Allen, Nancy J., Morisset, Jacques, Pirnia, Neda
Format:	Publication biblioteca
Language:	English en_US
Published:	Washington, DC: World Bank and the International Finance Corporation 2001
Subjects:	AGENCY PROBLEMS, BALANCE OF PAYMENTS, COLLECTIVE ACTION, CONSUMERS, CORPORATE INCOME TAX, CORPORATE INCOME TAXES, CREDIT SYSTEMS, DISCOUNT RATE, DIVIDENDS, DOMESTIC FIRMS, DOMESTIC INVESTORS, DOMESTIC MARKET, DOMESTIC MARKETS, ECONOMETRIC ANALYSIS, ECONOMIC DEVELOPMENT, ECONOMISTS, EMPIRICAL STUDIES, EXPORT MARKETS, FINANCIAL ASSISTANCE, FINANCIAL SERVICES, FISH, FOREIGN COMPANIES, FOREIGN DIRECT INVESTMENT, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN INVESTORS, FREE TRADE, FREE TRADE AGREEMENT, GROSS DOMESTIC PRODUCT, GROWTH RATE, GROWTH RATES, HARMONIZATION, IMPORTS, INCOME, INCOME TAX RATE, INTERNATIONAL ECONOMICS, INTERNATIONAL NORMS, INVESTMENT FLOWS, INVESTMENT INCENTIVES, INVESTMENT INFLOWS, LEGISLATION, LICENSES, MEMBER COUNTRIES, MULTINATIONAL COMPANIES, NATIONAL MARKET, NEIGHBORING COUNTRIES, NPV, POTENTIAL INVESTORS, PRESENT VALUE, PRIVATE SECTOR, PROVISIONS, PUBLIC ENTERPRISES, SAVINGS, TAX, TAX COMPETITION, TAX CREDITS, TAX INCENTIVES, TAX RATES, TAX REFORM, TAX REVENUE, TAX SYSTEM, TAX SYSTEMS, TAXATION, TREASURY, WAGES, WORLD TRADE, WORLD TRADE ORGANIZATION,
Online Access:	http://documents.worldbank.org/curated/en/2001/01/1614958/using-tax-incentives-compete-foreign-investment-worth-costs http://hdl.handle.net/10986/13979
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