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Business and Economics > Corporate Taxation

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Cover IMF Working Papers
Empirical Evidenceon the Effects of Tax Incentives
Mr. Alexander D Klemm
and
Stefan van Parys
This paper considers two empirical questions about tax incentives: (1) are incentives used as tools of tax competition and (2) 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 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 corporate income tax rates and longer tax holidays are effective in attracting FDI, but not in boosting gross private fixed capital formation or growth.
Keywords:
WP; economic growth; CIT rate; GMM estimator; system GMM result; Tax incentives; tax competition; investment; tax variable; investment allowance; system GMM estimation result; difference GMM estimator; Tax holidays; Corporate income tax; Foreign direct investment; Estimation techniques; Sub-Saharan Africa; Asia and Pacific; Caribbean; Global
Cover IMF Working Papers
Diamond Smuggling and Taxation in Sub-Saharan Africa
Mr. Matthias Vocke
and
Nienke Oomes
This paper provides an overview of diamond mining in sub-Saharan African countries, and explores the reasons for substantial differences in their tax rates and fiscal revenues from the sector, which mainly arise from differences in the incentives for smuggling. In a theoretical model, we show that optimal diamond tax rates increase with the degree of competition among diamond buyers, as well as with the corporate share of diamond production, which is confirmed by the data. We then discuss policies to increase revenue, including by enhancing mining productivity, stimulating the exploration of new areas, reducing barriers to entry, and attracting investment into value-adding downstream operations.
Keywords:
WP; number of sellers; market price; diamond; mining; nonrenewable resource; optimal taxation; tax evasion; export company; diamond production; export levy; export value; Mining sector; Anti-smuggling; Exports; Corporate taxes; Sub-Saharan Africa; Africa; mining productivity; diamond tax regime; diamond sector taxation; diamond mining