Financial incentives to enhance capital investments in the emerging market economy of South Africa

Abstract

Governments often provide financial incentives to enhance capital investments, as capital is one of the four main production factors in the business environment. Financial incentives may attract capital investments, which should increase economic development and job opportunities in the long run. The objective of this research embodies the improvement of financial decision-making with reference to financial incentives to enhance capital investments in emerging market economies. While there are a variety of financial incentives which can be applied, this research paper concentrates on the well-known financial incentives, viz. the wear and tear allowances, the initial and investment allowances, the investment tax credits, cash grants, as well as tax havens and tax holidays. South Africa is a developing country and is classified as one of the 21 emerging market economies of the world. As the empirical study focuses on the top listed South African companies, the conclusions of this study may also be valuable to other countries with emerging market economies, where the enhancement of investments is one of the key attributes

Empirical Research on Tax Havens

“…The author uses the literature to de ne tax haven as a term associated to nil or low taxes, lack of transparency and no requirement of being physically present to operate. On the other hand Cardoso et al (2011) refers to tax havens as countries that allow for tax reduction and tax avoidance practices.…”

“…It is not clear if tax havens promote money laundering 5 , and for this reason Schwarz (2011) studied the relation between tax havens and money laundering centres reaching two conclusions. Firstly, that tax havens and money laundering services share some complementarities.…”

“…4 Information extracted from the following source: https://www. nancialsecrecyindex.com/PDF/Switzerland.pdf 5 Money laundering: Money generated from illegal activities (for example drug tra cking) and introduced in the economy, taking the form of a nancial asset around the world. The money circulation in the country makes it cheaper and more easily available, resulting in a positive stimulation of investment and consumption.…”