Coordinating Revenue Incentive Policies in the Caribbean

IMF Working Papers, August 28, 2020

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The pervasive use of tax incentives is costly for the Caribbean countries, yet the benefits seem limited.
Better policy coordination at the regional level is needed to help overcome the collective action problems and generate more revenue to support the much-needed infrastructure investment.
Using the region’s Citizenship-by-Investment (CBI) programs as an example, the paper shows that a price-quantity coordination mechanism can help achieve an efficient outcome with greater CBI incomes for member countries.

CBI programs are used as an illustrative case of how tax/revenue incentive policies interact regionally.
A price-quantity coordination mechanism is presented as a tool that can produce an efficient outcome and increase CBI incomes for member countries.

Regional policy coordination is necessary to address collective action problems inherent in tax incentive competition.
Coordination can help:
- Reduce costly and ineffective tax incentives.
- Generate more revenue for infrastructure investment.
- Improve outcomes from regionally shared revenue-generating programs such as CBI.

Subject: Balance of payments, Competition, Corporate income tax, Environment, Financial markets, Foreign direct investment, Natural disasters, Tax incentives, Taxes
Keywords: Caribbean, citizenship-by-investment, Competition, competition model, Corporate income tax, country, ECCU citizenship program, ECCU country, ECCU member country, foregone revenue, Foreign direct investment, incentive policy, Natural disasters, price, regimes in the ECCU, regional policy coordination, revenue, tax competition, Tax incentives, tourism, tourism sector, type country, WP