Fiscal Incentives For Investment And Innovation

, by USA, Oxford University Press; Shah, Anwar

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ISBN: 9780821359020 | 0821359029
Cover: Paperback
Copyright: 8/10/2004

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Developing countries continue to make widespread use of tax policy instruments to promote industrial and technological development. The actual effect of these instruments on business activity and government revenues, however, remains an open question. This volume takes an important first step in quantifying the investment incentives on business decisions related to production and investment. In addition, the book suggests the consequences of such incentives for government revenues. It will be of interest to students and scholars of public finance, industrial organization, and developmental economics.

Foreword

xiii

Preface

Acknowledgments

xvi

List of Contributors

xvii

Overview

(30)

RESEARCH GUIDANCE ON CONCEPTUAL AND INCENTIVES DESIGN ISSUES

Perspectives on the Role of Investment Incentives in Developing Countries

(106)

Robin W. Boadway

Anwar Shah

Investment Incentives in Developing Countries: Types of Instruments and Frequency of Use

(5)

The Economic Rationale for Investment Incentives

(20)

The Conceptual Effect of Investment Incentives

(37)

The Effect of Tax Incentives on Investment: A Brief Survey of the Empirical Approaches and Applications in Developing Countries

(7)

Concluding Remarks

101

(2)

Appendix. Characteristics of Corporate Tax Systems in Selected Economies

103

(25)

Notes

128

(4)

References

132

(5)

The Cost of Capital and Investment in Developing Countries

137

(28)

Alan Auerbach

The Model

138

(10)

Changes in Tax Regime

148

(6)

Institutional Factors: Calculating Γ and r

154

(4)

Conclusion

158

(1)

Appendix. Derivation of Firm Decision Rule

158

(3)

Notes

161

(2)

References

163

(2)

Tax Holidays and Investment

165

(30)

Jack M. Mintz

A Detailed Description of Tax Holidays

167

(4)

Theoretical Analysis

171

(14)

Empirical Analysis

185

(5)

Conclusions

190

(1)

Notes

191

(2)

References

193

(2)

Taxation, Information Asymmetries, and the Financing Choice of the Firm

195

(36)

Andrew Lyon

Debt, Equity, and Taxes under Symmetric Information

196

(3)

The Miller Equilibrium

199

(3)

Financing Choices under Asymmetric Information

202

(11)

Rural Credit Market Solutions to Asymmetric Information

213

(3)

Policy Implications

216

(8)

Appendix 4A. Modigliani and Miller's Homemade Leverage and Firm Value

224

(1)

Appendix 4B. Rationing with Asymmetric Information

225

(1)

Notes

225

(1)

References

226

(5)

Research and Development Investment, Industrial Structure, Economic Performance, and Tax Policies

231

(58)

Anwar Shah

R&D Capital and the Structure of Production: Theory and Evidence

232

(12)

R&D Capital and Product Market Structure: Theory and Evidence

244

(7)

Public Policy and R&D Investment

251

(15)

Tax Policy, Production Structure, and R&D Capital

266

(7)

Summary

273

(3)

Appendix 5A. The Data

276

(2)

Appendix 5B. Definition of Scientific Research and Experimental Development

278

(1)

Notes

279

(1)

References

280

(9)

Tax Policy toward Foreign Direct Investment in Developing Countries in Light of Recent International Tax Changes

289

(20)

Joel Slemrod

An Overview of Host and Home Country Taxation of the Income from FDI

290

(1)

The Normative Theory of Host Country Taxation of FDI

291

(5)

Recent Changes in Home Country Taxation of FDI

296

(5)

Rethinking Host Country FDI Tax Policy in Light of Home Country Policy Changes

301

(4)

Notes

305

(1)

References

306

(3)

EMPIRICAL EVIDENCE ON THE EFFECTIVENESS OF TAX INCENTIVES

Tax Burden Analysis

Why Tax Incentives Do Not Promote Investment in Brazil

309

(32)

Antonio Estache

Vitor Gaspar

A Methodology to Assess Tax-Driven Distortion in the Capital Market

310

(7)

Effective Tax Rates on Capital in Brazil

317

(15)

Conclusions

332

(2)

Appendix. Description of the Principal Brazilian Fiscal Incentives Available in 1989

334

(4)

Notes

338

(2)

References

340

(1)

Investment Incentives and the Corporate Tax System in Malaysia

341

(34)

Robin W. Boadway

Dale Chua

Frank Flatters

Definition of the Marginal Effective Tax

343

(1)

The Measurement of rg and rn

344

(7)

Posttax Returns on Savings: The Effective Marginal Rate of Personal Tax

351

(1)

Estimates: The Marginal Effective Personal Tax

352

(3)

Estimates: Effective Corporate Taxes

355

(12)

Conclusions

367

(2)

Appendix. Description of Data

369

(2)

Notes

371

(2)

References

373

(2)

Indirect Taxes and Investment Incentives in Malaysia

375

(24)

Robin W. Boadway

Dale Chua

Frank Flatters

Indirect Taxes in Malaysia

376

(2)

Methodology for Estimating Incentive Effects of Indirect Taxes

378

(4)

Estimates of Distortionary Effects of Malaysia's Indirect Tax System

382

(7)

Conclusions and Policy Implications

389

(1)

Appendix. Measuring METRs in the Presence of Indirect Taxes

390

(6)

Notes

396

(1)

References

397

(2)

Fiscal Incentives for Investment in Thailand

399

(38)

Robert Halvorsen

Theoretical Rationale for Investment Incentives

400

(2)

The Board of Investment

402

(8)

Magnitude and Characteristics of Promoted Activities

410

(12)

Cost-Effectiveness of Investment Incentives

422

(10)

Conclusions

432

(2)

Notes

434

(2)

References

436

(1)

Patterns in Investment Tax Incentives among Developing Countries

437

(18)

Ngee Choon Chia

John Whalley

Investment Tax Incentives in Developing Countries

438

(4)

The Effect of Tax Incentives in Developing Countries

442

(3)

Tax Competition and Investment Incentives in ASEAN Countries

445

(6)

Conclusion

451

(1)

Notes

452

(1)

References

453

(2)

Corporate Income Taxation and Foreign Direct Investment in Central and Eastern Europe

455

(26)

Jack M. Mintz

Thomas Tsiopoulos

Results of the Analysis

457

(8)

Policy Options for Tax Incentives

465

(5)

Conclusion

470

(1)

Appendix. Calculating the Effective Tax Rates

471

(6)

Notes

477

(2)

References

479

(2)

Do Taxes Matter for Foreign Direct Investment?

481

(22)

Anwar Shah

Joel Slemrod

Review of the Existing Empirical Literature

482

(2)

FDI in Mexico

484

(2)

Some Theory and the Empirical Model

486

(3)

The Data and Estimation

489

(6)

Policy Implications

495

(1)

Appendix 13A. Taxation of Foreign Investment Income in Mexico

496

(1)

Appendix 13B. Data Definitions

497

(2)

Note

499

(1)

References

500

(3)

THE EFFECTS OF TAXATION ON PRODUCTION AND INVESTMENT DECISIONS

Corporate Tax Structure and Production

503

(42)

Jeffrey I. Bernstein

Anwar Shah

Cost of Capital Expenditure

504

(1)

Tax Structure and Production: A Dynamic Theoretical Model

505

(7)

Estimation Model and Tax Elasticities

512

(9)

Mexico

521

(3)

Pakistan

524

(7)

Turkey

531

(6)

Summary and Conclusions

537

(3)

Notes

540

(2)

References

542

(3)

Tax Incentives, Market Power, and Corporate Investment

545

(72)

Dagmar Rajagopal

Anwar Shah

The Theoretical Model

548

(16)

Derivation of the Estimating Equations from the Theoretical Models, Non-Nested Hypothesis Tests

564

(11)

The Empirical Results and Their Policy Implications

575

(13)

Summary

588

(3)

Appendix. Details of Derivations, Elasticity Formulas, Sources for the Data, and Corporate Income Taxes in Pakistan and Turkey

591

(23)

Note

614

(1)

References

614

(3)

Do Tax Policies Stimulate Investment in Physical and R&D Capital?

617

(18)

Anwar Shah

John Baffes

Corporate Tax Incentives in Pakistan

618

(1)

The Model

619

(2)

Data, Estimation, and Results

621

(2)

The Effect of Tax Policies on Investment

623

(6)

Summary and Policy Implications

629

(1)

Appendix 16A. Derivation of Input Demands

629

(2)

Appendix 16B. Data Description and Construction of Variables

631

(1)

Notes

632

(1)

References

633

(2)

ECONOMYWIDE IMPLICATIONS OF INVESTMENT INCENTIVES

Macroeconomic Implications of Investment Incentives in Mexico

635

(38)

Andrew Feltenstein

Anwar Shah

Tax Incentives for Investment in Mexico

635

(1)

Model Specification

636

(13)

Simulation Results

649

(7)

Summary and Conclusions

656

(1)

Appendix. Corporate Structure and Investment Incentives in Mexico

657

(12)

Notes

669

(1)

References

670

(3)

Modeling the General Equilibrium Effects of Investment Incentives: The Philippine Case

673

(30)

Ramon L. Clarete

Overview of the Basic Model

674

(2)

Capital Formation and Savings in the Model

676

(5)

Fiscal Investment Incentives and Model Calibration

681

(6)

Static and Dynamic Economic Effects of Fiscal Incentives

687

(10)

Conclusion

697

(3)

Notes

700

(1)

References

700

(3)

Index

703

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Fiscal Incentives For Investment And Innovation

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