Comparing Tax Incentives across Jurisdictions: A Pilot Study

Abstract

Recent research suggests that profit based tax incentives are costly, tend to fail in attracting additional desirable foreign direct investment, and are problematic especially when they are temporary (e.g. tax holidays), geographically confined (e.g. economic zones) and when they provide full tax exemption/nil taxation (vs. tax reduction concession). Yet, there is no publicly available dataset that would allow systematic panel analyses across jurisdictions of these phenomena. This research gap limits the validity and reliability of existing research findings, and constrains future research into the relative effects and costs of tax incentives. Therefore, we analyse 15 countries, testing data availability, comparability and potential criteria for establishing an assessment matrix for a public cross-country dataset of profit based tax incentives. Preliminary findings suggest that when compared, high income countries tend to offer more cost based incentives, while middle and low income countries most often rely on special economic zones and tax holidays.