Economic Growth:: 1. Offering Tax Incentives For Investment by Local Firms

Economic Growth:
Since the government has control over both demand-side and supply-side factors, it has a crucial
role to play in the economic growth of a country. It can deploy monetary and fiscal instruments to
ensure stability in the economy.
c. Give cash payment for good school attendance
A good education is vital to economic growth and uplifting the living standards because it gives
students from both wealthy and underprivileged families equal chance to advance. Foremost, good
schooling will prepare students for their future career. When they are through with their studies, they
will get employment and thus be economically independent. With better incomes, consumption
levels in the economy will increase and therefore provide opportunities for growth of businesses.
Moreover, good schooling will enhance the quality of human resources. The economy will benefit
from highly qualified employees who will help to increase the productivity. On the graph below, good
education results in the shift of long-run aggregate supply (LRAS) curve from LRAS to LRAS1. As a
result, potential GDP increases from Yp to Yp1.
1. Offering tax incentives for investment by local firms

Introduction: Tax incentives have traditionally been used by governments as tools to promote a
particular economic goal. They are preferential tax treatments that are offered to a selected
group of taxpayers and take the form of exemptions, tax holidays, credits, investment
allowances, preferential tax rates and import tariffs (or customs duties), and deferral of tax
liability. From my point of view, I believe that…
Body:
1st: The generalized use of tax incentives has been justified by the need to: (i) correct market
inefficiencies associated with the externalities of certain economic activities; (ii) target new
industries and mobile investments that are subject to tax competition; (iii) generate a form of
agglomeration economies, or concentration externalities; and (iv) subsidize companies during
their sector’s downturn. As a matter of fact, developed countries normally use tax incentives to
promote research and development activities, export activities, and support the
competitiveness of their enterprises in the global market; while developing countries use them
to attract foreign investment and foster national industries. If properly designed and
implemented, tax incentives are a useful tool for attracting investments that would not have
been made without the provision of tax benefits. Tax incentives are justified if they correct
market inefficiencies or generate positive externalities. Scholars view such tax incentives as
desirable, given that, without government intervention, the level of foreign direct investment
would be suboptimal.
2nd: It is not surprising that Governments often choose tax incentives over other types of action.
It is much easier to provide tax benefits than to correct deficiencies in the legal system or to
dramatically improve the communications system in a country. In addition, tax incentives do not
require an expenditure of funds by the Government as do some alternatives, such as the
provision of grants or cash subsidies to investors. Although tax incentives and cash grants may
be similar in terms of their economic cost to Governments, for political and other reasons, it is
easier to provide tax benefits than to actually provide funds to investors.
3rd: New foreign direct investment may bring substantial benefits, some of which are not easily
quantifiable. A well-targeted tax incentive programme may be successful in attracting specific
projects or specific types of investors at reasonable costs compared with the benefits received.
The types of benefits from tax incentives for foreign investment are the benefits commonly
associated with foreign direct investment, including increased capital, knowledge and
technology transfers, increased employment and assistance in improving conditions in less
developed areas.
Conclusion: Tax incentives can play a useful role in encouraging both domestic and foreign
investment. The extent of their usefulness, and at what cost, depends upon how well the tax
incentive programmes are designed, implemented and monitored. The questions of whether to
use tax incentives and what form they should take are not easy to answer. The following,
however, are some clear guidelines which may improve the chances of success of tax incentive
programmes: the objectives of the tax incentive programme should be clearly set forth; the type
of tax incentive programme should be crafted to best fit the objective.Tthe Government should
estimate the anticipated costs and benefits of the incentive programme in a manner similar to
other types of tax expenditure analysis; the incentive programme should be designed to
minimize the opportunities for corruption in the granting of incentives and for taxpayer abuse in
exploiting the tax benefits; the tax incentive regime should have a definite sunset provision to
allow for a determination of the merits of the programme.
https://www.un.org/esa/ffd/wp-content/uploads/2018/02/tax-
incentives_eng.pdf
2. Free trade
3. Give cash payments for good school attendance
4. Restrict imports to protect domestic industries

Economic Growth:: 1. Offering Tax Incentives For Investment by Local Firms

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1. Offering tax incentives for investment by local firms

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