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Corporate Income Tax Exemption: The Worst Form of Tax Incentive?
[L’exonération d’impôt sur les sociétés : la pire des incitations fiscales ?]

Author

Listed:
  • Alou Adessé Dama

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

  • Grégoire Rota-Graziosi

    (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

  • Fayçal Sawadogo

    (FMI - Fonds Monétaire International - FMI, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

Abstract

To attract Foreign Direct Investment crucial for their development, developing countries are multiplying the number of tax incentive schemes, and in particular Corporate Income Tax (CIT) exemptions. Dama et al. (2023) establish that this type of tax incentive is regressive, and therefore redundant and inefficient: More profitable firms benefit more from CIT exemptions (regressivity) and would have invested even without these exemptions (redundancy and inefficiency). Developed countries prefer CIT credits to CIT exemptions in their incentive systems. These credits improve the targeting of desired investments and reduce tax revenue losses.

Suggested Citation

  • Alou Adessé Dama & Grégoire Rota-Graziosi & Fayçal Sawadogo, 2024. "Corporate Income Tax Exemption: The Worst Form of Tax Incentive? [L’exonération d’impôt sur les sociétés : la pire des incitations fiscales ?]," Post-Print hal-04523632, HAL.
    • Handle: RePEc:hal:journl:hal-04523632
    Note: View the original document on HAL open archive server: https://uca.hal.science/hal-04523632
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