Tax Concessions and Foreign Direct Investment in the Eastern Caribbean Currency Union
Author:
Ms. Jingqing Chai
Search for other papers by Ms. Jingqing Chai in
Current site
Google Scholar
Close
and
Rishi Goyal null

Search for other papers by Rishi Goyal in
Current site
Google Scholar
Close
https://orcid.org/0000-0002-5853-9207
Tax concessions have been employed as a central component of the development strategy in the small island states comprising the Eastern Caribbean Currency Union. This paper compares the costs of concessions in terms of revenues forgone with the benefits in terms of increased foreign direct investment. The costs are very large, while the benefits appear to be marginal at best. Forgone tax revenues range between 9½ and 16 percent of GDP per year, whereas total foreign direct investment does not appear to depend on concessions. A rethinking of the use of concessions in the region is needed urgently.
  • Collapse
  • Expand
IMF Working Papers