3
Chapter I
An overview of key concepts and issues*
I . Introduction
The present chapter seeks to provide an overview
of key concepts and
issues regarding tax incentives and their use to attract investment.
1
Some contend that tax incentives, particularly for foreign direct
investment, are bad in both theory and in practice.
Tax incentives are
bad in theory because they distort investment decisions. Tax incentives
are bad in practice because they are often ineffective, inefficient and
prone to abuse and corruption.
Yet almost all countries use tax incentives.
In developed
countries, tax incentives often take the form of investment tax credits,
accelerated depreciation and favourable tax treatment for expenditures
on research and development. To the extent possible in the post-World
Trade Organization world, developed countries
also adopt tax regimes
that favour export activities and seek to provide their resident
corporations a competitive advantage in the global marketplace.
Many transition and developing countries have an additional focus.
Tax incentives are used to encourage domestic industries and to
attract foreign investment. Here, the tools
of choice are often tax
holidays, regional investment incentives, special enterprise zones and
reinvestment incentives.
Much has been written about the
desirability of using tax
incentives to attract new investment. The United Nations,
2
the
*
Prepared by Eric M. Zolt, Michael H. Schill Distinguished Professor of Law,
UCLA School of Law.
1
Parts of the discussion in the present chapter rely on Alex Easson and Eric M.
Zolt, “Tax Incentives”, World Bank Institute (Washington, D.C.,
World Bank Group,
2002), available from http://siteresources.worldbank.org/INTTPA/Resources/Eas-
sonZoltPaper.pdf.
2
See, for example, United Nations Conference on Trade and Development,
Incentives and Foreign Direct Investment
(United Nations publication, Sales No. E.96.
II.A.6); and
Tax Incentives and Foreign Direct Investment: A Global Survey
(United
Nations publication, Sales No. E.01.II.D.5).
4
Design and Assessment of Tax Incentives
International Monetary Fund (IMF),
Dostları ilə paylaş: