Optimal Tax/Expenditure Competition Strategy of Governments in the Presence of Time Inconsistency [electronic resource] : The Case for Investment Tax Abacemencs.
Material type:
TextSeries: IMF Working Papers; Working Paper ; No. 90/59Publication details: Washington, D.C. : International Monetary Fund, 1990Description: 1 online resource (20 p.)ISBN: 145196563X :ISSN: 1018-5941Subject(s): Capital Formation | Capital Income | Tax Competition | Tax Journal | Tax Payments | United StatesAdditional physical formats: Print Version:: Optimal Tax/Expenditure Competition Strategy of Governments in the Presence of Time Inconsistency : The Case for Investment Tax AbacemencsOnline resources: IMF e-Library | IMF Book Store Abstract: Businesses which seek the location that offers the highest profitability are likely to consider tax incentives and the level of government services available. However, once a business commits itself to a locality, high moving costs render it vulnerable to future tax increases or denial of government services. Fear of time inconsistency will lower expected business profitability in a region. This paper indicates that a developing country or locality can attract a higher level of capital with a tax abatement scheme which provides a subsidy (funded by a capital income tax) equivalent to moving/setup costs.
Businesses which seek the location that offers the highest profitability are likely to consider tax incentives and the level of government services available. However, once a business commits itself to a locality, high moving costs render it vulnerable to future tax increases or denial of government services. Fear of time inconsistency will lower expected business profitability in a region. This paper indicates that a developing country or locality can attract a higher level of capital with a tax abatement scheme which provides a subsidy (funded by a capital income tax) equivalent to moving/setup costs.
Description based on print version record.
There are no comments on this title.