Tax Concessions and Foreign Direct Investment in the Eastern Caribbean Currency Union [electronic resource] / Jingqing Chai.
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TextSeries: IMF Working Papers; Working Paper ; No. 08/257Publication details: Washington, D.C. : International Monetary Fund, 2008Description: 1 online resource (33 p.)ISBN: 1451871155 :ISSN: 1018-5941Subject(s): Concessions | Direct Investment | FDI | Incentives | Tax Incentives | Antigua and Barbuda | Saint Vincent and the GrenadinesAdditional physical formats: Print Version:: Tax Concessions and Foreign Direct Investment in the Eastern Caribbean Currency UnionOnline resources: IMF e-Library | IMF Book Store Abstract: 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 9 1/2 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.
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 9 1/2 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.
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