Do tax incentives matter for investment? A literature review

Munongo, Simon; Akanbi, Olusegun Ayo; Robinson, Zurika

doi:10.15208/beh.2017.12

Cited by 30 publications

(25 citation statements)

References 38 publications

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“…Scientists [6] researching the use of tax incentives in developing countries prove that infrastructure, human capital and institutions have a large impact on attracting investment compared to tax incentives. Similar conclusions were formulated in an article by South African authors [7] who believe that despite the important role in attracting investments played by tax incentives, they are effective for attracting any significant investments only in combination with non-tax measures, especially if availability of developed infrastructure.…”

Section: Proceedings Of the Russian Conference On Digital Economy Andsupporting

confidence: 73%

Influence of Tax Administration on Investment Processes

Alexandrov¹,

Vyakina²,

Skvortsova³

2020

Proceedings of the Russian Conference on Digital Economy and Knowledge Management (RuDEcK 2020)

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Despite the high losses of the state budget due to tax benefits, the introduced tax investment incentives did not lead to the increase in business investment. A review of the scientific literature indicates conflicting results justifying the effectiveness of tax investment incentives in different countries. Consequently, an objective assessment of the effectiveness of changes in tax legislation, analysis and generalization of the practice of tax benefits are becoming extremely relevant in this situation. The article aims at summarizing world experience and the Russian practice of tax incentives for investment activities and assessing the impact of tax administration on investment processes. Based on the comparative analysis of the tax incentives use, the authors conclude that the tax incentives are completely ineffective in attracting investments in countries with poor investment climate and low quality of public administration. In such conditions, the introduction of tax benefits seems to be of little value, since a correlation-significant relationship between tax benefits and the level of investment has not detected. Low tax rates provide powerful investment incentives only in well-governed countries. Empirical studies of tax incentives for attracting investment today go from developing bold hypotheses about the impact of taxation on investments to implementing their results in investment policy both at the national and sub-national levels around the world. Keywordsinvestments, tax investment incentives, tax administration I.

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Section: Proceedings Of the Russian Conference On Digital Economy Andsupporting

confidence: 73%

Influence of Tax Administration on Investment Processes

Alexandrov¹,

Vyakina²,

Skvortsova³

2020

Proceedings of the Russian Conference on Digital Economy and Knowledge Management (RuDEcK 2020)

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“…As indicated by Havránek and Iršová (2010), the governments of host countries often use investment incentives as a tool addressed to foreign investors in order to compensate for shortcomings such as the existence of a high burden of employment costs and/or insufficient labor productivity in the host country. In a similar sense, a review study by Munongo et al (2017) concluded that most of the empirical studies that they had explored suggested a combination of incentives with other factors such as macroeconomic conditions, infrastructure, and transparent institutions in an effort to effectively attract FDI. Similarly, a meta-analytic review by Bailey (2018) concluded that "good government" attracts FDI.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Absence of tax sparing provisions in bilateral tax treaties can cause nullification of host country tax incentives by home country taxation. In addition, Munongo et al (2017) pointed to other problems associated with tax incentives such as difficulties associated with the administration of tax incentives, misallocation of resources, and potential corruption, as a result of which they may be unattractive to investors.…”

Section: Slovakiamentioning

confidence: 99%

Direct and Indirect Effects of Investment Incentives in Slovakia

Hintošová

Sudzina

Barlašová

2021

JRFM

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Countries trying to attract foreign direct investment often use various tools to influence the foreign investor’s allocation decision including public subsidies in the form of investment incentives. However, the effects associated with providing these incentives are often questioned, especially in light of the need to achieve at least a minimum level of attractiveness of the business environment. The primary aim of the present study was to examine the effects of investment incentives on foreign direct investment inflows (direct effect) and on selected macroeconomic variables (indirect effects) under the conditions in Slovakia. Findings showed that the preference of specific forms of investment incentives by the government of the Slovak Republic changed slightly in the observed period of 2002–2019. The results of the regression analysis further suggest that while financial incentives have a positive statistically significant direct effect on foreign direct investment inflows, in the case of fiscal incentives, this effect is the opposite. In terms of indirect effects of investment incentives, only a reduction in the unemployment rate through foreign direct investment was found. The study contributes to the literature by providing evidence on the effects of various forms of investment incentives and by offering some implications for investment promotion policy.

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“…A study was conducted on tax incentives and investment to review both theoretical and empirical literatures to establish the merits and demerits of tax incentives (Munongo, Akanbi, & Robinson, 2017).They found that, most of the empirical studies have been explored are concluded that though tax incentives might be important in attracting FDI they are more effective when combined with other non-tax factors.…”

Section: Literature Reviewmentioning

confidence: 99%

Tax Incentives and Industrial Development in Bangladesh: An Evaluation of Policy Impact on Sectoral Growth

Chowdhury

2019

Int. J. Res. Granthaalayah

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Tax incentives are tools used worldwide to enhance domestic and foreign investment and enhanced investment leads to expected economic growth. This study is an attempt to review the industrial policies and direct tax incentives of Bangladesh to have a deep insight on the congruence among them and also show some indirect impact of tax incentives on development through analyzing some fiscal and investment data. Content and document analysis method has been used to accomplish this study. Sources of data were the industrial policies, tax codes and economic surveys of Bangladesh and some scholarly articles. By reviewing some tax related aspects of industrial polices and existing direct tax incentives provided by the tax authority, it was found that incentives suggested by industrial policies and actually provided tax incentives are almost same and the changing pattern of priority sectors have been shifted to infrastructure, power and technology sectors. By observing some investment and GDP related data it is found that local private sector investments are dominant over FDI and the manufacturing sectors contribution to GDP are increasing and consistent in last 13 years.

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Do tax incentives matter for investment? A literature review

Cited by 30 publications

References 38 publications

Influence of Tax Administration on Investment Processes

Influence of Tax Administration on Investment Processes

Direct and Indirect Effects of Investment Incentives in Slovakia

Tax Incentives and Industrial Development in Bangladesh: An Evaluation of Policy Impact on Sectoral Growth

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