Chapter 6. Tax Incentives: To Use or Not To Use?


Tax incentives are all too pervasive in the Caribbean and have been an integral part of the tax systems since the 1970s. They were enacted to attract private investment in tourism, manufacturing, and agro-industries in an attempt to diversify the economy away from primary commodity exports—sugar and bananas—that were adversely affected by the dismantling of preferential trading arrangements with Europe in the 1990s. Concessions for investment in sectors such as tourism and manufacturing have generally been provided through targeted legislation, such as the Fiscal Incentives Act, Aid to Pioneer Industries Act, and the Hotel Aids Act. Tax incentives granted for regional, social, and welfare reasons are provided in the Common External Tariff (CET) Act and in specific legislation covering statutory bodies and state enterprises.