The Changing Structure of Tax Policies for Foreign Direct Investment in Developing Countries

Abstract

Developing countries keen to attract foreign direct investment (FDI) have typically used various preferential tax policies to be competitive. Tax holidays have been especially prevalent in the 1980s (Mintz [1990] and Shah [1995]) since they provide new foreign investors a low-tax regime for a qualifying period on the presumption that a company needs time to establish good levels of profitability.Working Paper Number 04-46