IMF Tax Policy Seminar for Asian and Pacific Countries On Tax Incentives

Financed by Japan Administered Account for Selected IMF Activities (JSA)

Both industrial and developing countries use tax incentives for realizing various policy objectives. In Asian countries, tax incentives have traditionally been used in efforts to attract foreign investment and spur economic growth. However, tax incentives are not first-best instruments to attract genuine long term investment. Tax holidays, in particular, which exempt companies in a certain sector or regions for some prescribed period, may pose significant dangers to the tax system not only in the countries that adopt them but also in their neighbors.

The IMF provides its member countries with advice on how the tax system, including tax incentives, can best be used to facilitate sustainable long-term growth. Use of tax incentives should be limited to quite specific circumstances under which their use can be economically justified; tax holidays should be avoided altogether.

The Fiscal Affairs Department (FAD) hosted a seminar on tax incentives for Asia - Pacific countries, in collaboration with the Regional Office for Asia and the Pacific, from June 9 to 11, 2009, in Tokyo. Senior tax policy officials from 22 countries attended the seminar. The main theme of the seminar was whether, and how best, tax incentives can be used to facilitate sustainable long-term growth. The seminar was delivered in five half day sessions covering: causes, benefits and risks of tax incentives; countries’ experiences in using tax incentives; tax expenditure analysis; tax policy lessons from the current financial crisis; and a synopsis of ongoing discussions regarding tax avoidance in international fora. The seminar was financed in part by the Japanese government through the JSA facility.

AGENDA