Empirical Evidence on the Effects of Tax Incentives

Alexander Klemm and S. van Parys ()
Additional contact information
S. van Parys: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper considers two empirical questions about tax incentives: (i) are incentives used as tools of tax competition and (ii) how effective are incentives in attracting investment? To answer these, we prepared a new dataset of tax incentives in over 40 Latin American, Caribbean and African countries for the period 1985–2004. Using spatial econometrics techniques for panel data to answer the first question, we find evidence for strategic interaction in tax holidays, in addition to the well-known competition over the corporate income tax (CIT) rate. We find no evidence, however, for competition over investment allowances and tax credits. Using dynamic panel data econometrics to answer the second question, we find evidence that lower CIT rates and longer tax holidays are effective in attracting FDI in Latin America and the Caribbean but not in Africa. None of the tax incentives is effective in boosting gross private fixed capital formation.

Keywords: Tax incentives; tax competition; investment; developing countries (search for similar items in EconPapers)
JEL-codes: H25 H87 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-09
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_10_673.pdf (application/pdf)

Related works:
Journal Article: Empirical evidence on the effects of tax incentives (2012)
Working Paper: Empirical Evidenceon the Effects of Tax Incentives (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:10/673

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().