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- Title
AN INTERNATIONAL COMPARISON OF TAX BASE EROSION DUE TO TAX EXPENDITURES.
- Authors
Singleton, W. R.; Nakamura, T.
- Abstract
The use of tax expenditures (tax incentives and tax subsidies) in different countries provides a measure of tax base erosion due to governmental taxation choices. This study compares a sample of selected countries' use of tax expenditures to determine if countries differ significantly in the extent of their use, the relative purposes for which they are used, and the methods used for their implementation. Such a comparison is important for policy analysts in different countries for tax base design, tax reform and assessment of tax incidence. In addition, tax revenues (or lost revenues due to tax expenditures) affect government budget deficits, which in turn influence monetary policy, hence the interest rates that face firms. At the firm level, taxes have a direct impact on effective tax rates, and therefore on the cash flows that influence investment decisions at the margin. Tax effects become even more complicated for firms operating internationally, as different countries provide a different mix of direct expenditures and indirectly with tax expenditures. Thus, a comparative analysis of tax expenditures in different countries provides insights into a country's tax and fiscal environment. The results indicate that significant differences exist in the total use, purpose, and method of implementation. In addition, the results of this study extend the work of the Organization for Economic Cooperation and Development (OECD) conducted in 2010.
- Subjects
TAX expenditures; TAX base; TAX deductions; TAXATION; BUDGET deficits -- Government policy
- Publication
International Journal of Business, Accounting & Finance, 2016, Vol 10, Issue 1, p54
- ISSN
1936-699X
- Publication type
Article