Tax Incentives: Forms, Merits and Demerits – The Asian Experience

In this article, the author provides the arguments for and against the use of specific tax incentives such as tax holidays, reduced tax rates and investment tax allowances in developing countries. The experience of Asian countries in using tax incentives to attract foreign investment is also described. In conclusion, incentives have significant negative economic effects; a simple and well administered tax system with an overall low tax rate would be more effective to attract investors.