Financial Analytics: Science and Experience
 

The impact of tax incentives on attracting investment: International practice

Vol. 10, Iss. 8, AUGUST 2017

Received: 3 April 2017

Received in revised form: 5 May 2017

Accepted: 12 May 2017

Available online: 15 August 2017

Subject Heading: Economic policy

JEL Classification: E20, E60, E62, E66

Pages: 941–953

https://doi.org/10.24891/fa.10.8.941

Anisimova A.A. Financial Research Institute of Ministry of Finance, Moscow, Russian Federation aanisimova@nifi.ru

Importance The article discusses the issues of tax incentive use. Attracting investment can lead to significant tax policy changes. The introduction of investment incentives often leads to the destruction of tax bases, reducing tax revenue, people life quality degradation, which increases the relevance of studying the stated issues.
Objectives The aim of the study is to analyze the problems and possible solutions related to the development and introduction of tax incentives for investment based on international experience.
Methods For the study, I used empirical methods and general-logic approaches. I analyzed the most efficient measures of investment tax incentive and examined the main approaches of the tax incentive development.
Results The paper analyzes tax measures that can help attract investment, and it reveals the main problems related to tax incentives use. The paper presents the most effective tax policy mechanisms and investment tax incentive recommendations.
Conclusions The most preferable tax incentives are those that reduce the investment cost, such as accelerated depreciation and tax deductions. Tax incentive based on the tax rate reduction for income tax may result in lost budget revenues, because of commercial investment projects that can be profitable without tax incentives.

Keywords: investment, fiscal incentive, tax revenue, administration

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