Evaluating the Costs and Benefits of Corporate Tax Incentives : Methodological Approaches and Policy Considerations
Developing countries are increasingly offering tax breaks to attract investors and pursue various policy objectives such as encouraging investments in research and development (R and D) and increasing exports. Such incentives, however, can be very...
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| Format: | Brief |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/180341583476704729/Evaluating-the-Costs-and-Benefits-of-Corporate-Tax-Incentives-Methodological-Approaches-and-Policy-Considerations http://hdl.handle.net/10986/33433 |
| Summary: | Developing countries are increasingly
offering tax breaks to attract investors and pursue various
policy objectives such as encouraging investments in
research and development (R and D) and increasing exports.
Such incentives, however, can be very costly to governments.
Too often, developing countries - already struggling with
revenue mobilization - adopt investment incentives in an ad
hoc manner, without analyzing the value for money of these
instruments. Cost-benefit analysis can help policy makers
demonstrate the direct cost (tax revenue foregone) incurred
by governments against the economic benefits being pursued.
Global evidence on investment location decisions suggests
that while tax incentives can help attract investment, other
factors, such as the wider investment climate and market
opportunities, matter most. Tax incentives should therefore
be conceived as part of a country’s broader investment
policy framework and governments should be realistic about
the potential impact any measure may have. In this light,
cost-benefit analysis can serve as a powerful tool to inform
incentives policy reform and offer important inputs into a
country’s investment policy strategy. |
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