Tax Incentive to Exports: Some Implications for Policy Makers

Abstract

The major research question of this study is: Do American manufactures view DISC (the tax incentive to export) as assisting them in becoming more competitive in export markets? The importance of this question was recognized by Secretary of Treasury Michael Blumenthal who included an earlier version of this study in the April 1979 Treasury Report titled “The Operation and Effect of the Domestic International Sales Corporation (DISC).” As such the study has received recognition at the highest level of policy making. This study is unique in two respects: 1) it examines the impact of the tax incentive on the firm's total marketing and promotional efforts. Other studies have examined only the relationship between the tax incentive and change in export prices, and 2) this study expands the investigation of sample firms to include small businesses as well as multinationals. The conclusions of this study (surveying 125 multinationals and 125 small exporting firms) suggest that DISC stimulated some marketing activities for small companies and was used as a tax shelter for large multinationals. The main policy implication is that as a tax incentive DISC is helpful in attracting small firms into export marketing.© 1980 JIBS. Journal of International Business Studies (1980) 11, 74–84