Corporate Income Taxation and Foreign Direct Investment in Central and Eastern Europe
World Bank Publications, Jan 1, 1992 - Business & Economics - 18 pages
This report is based on a detailed analysis of the impact that CEE corporate income tax regimes have on the profitability of foreign investment. It has two purposes. The first is to describe the analysis and compare the corporate income tax regimes in the five CEE countries with the regimes in other countries that might compete for the same capital. The second purpose is to discuss the benefits and costs of the various options that the five CEE countries may consider for development of their corporate income tax policies. Particular attention is paid to the effects of tax holidays, which are temporary tax relief that all five countries offer to foreign investors. Some other tax incentives are examined including the impact that inflation would have on them.
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annual depreciation assets assumed benefits centive corporate income tax corporate tax policy corporate tax rate cost of capital coun Country Manufacturing Services debt/asset ratio economic depreciation effective tax burdens effective tax rates eliminating tax holidays equity FIFO finance invest five CEE countries footloose foreign direct investment Greece high effective tax high inflation higher effective host country Hungary Romania inflation rates interest deductions International Finance Corporation investment allowance investment tax allowance investments are financed investors LIFO low corporate tax low inflation manufacturing and services Manufacturing Services Czechoslovakia McKenzie and Mintz ment net-of-tax rate nominal interest rates OECD P.O. Box percent Country Manufacturing Poland Portugal rate of return rate tax rates on manufacturing reduce taxes paid return on capital revenue Table A-l tax base tax competitive tax credit tax depreciation allowances tax holi tax losses tax purposes tax system Taxation tion tive United vestment weighted average World Bank