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FrontPage arrow The News arrow Business arrow IMF rep advises against incentives
IMF rep advises against incentives PDF Print E-mail
Written by PNS   
Monday, 17 March 2008
Samoa and other small developing countries should move away from offering incentives to attract foreign investment, a senior economist at the International Monetary Fund (IMF) has suggested, reports Fiji Live.

Peter Mullins, from the IMF’s Fiscal Affairs Department, said that instead countries should look at broadening their tax base so that they can then reduce the rates “because a lower rate is probably more attractive to foreign investors”.

Mr Mullins was speaking on the topic The Changing Dynamic of Revenue Policy for Small Developing Countries at the Reserve Bank of Fiji yesterday.

“Our concern with incentives generally is that you often don’t know what the cost of it is. And also you don’t know whether you are getting value for money.

”I know that in the Pacific there is work published on cost of incentives and that is a positive thing,” he added.

Mr Mullins said that attracting investment for most countries, especially from abroad, is clearly a key concern which often leads to investment incentives.

”It is tempting and proliferating in many regions but not necessarily a good idea.”

Mr Mullins said  that evidence shows that businesses care more about stability in their affairs and good workers.

“Obviously when a company invests they look at a whole lot of issues - regulatory environment, political situation, and yes, they do look investment incentives, they look at tax rates, labour force, all of these factors.

”A better policy is to offer a stable, moderate tax regime (low rate, broad base).”

Although he did point out that this could be hard to give, given the pressure from neighbouring countries.

”What I have found interesting is that a lot of countries have offered incentives for a long time and still no one comes.

”So then you ask questions, why aren’t they coming. Is it because the incentives are not good enough or is it other factors? And often it is other factors.

”Studies clearly show that tax is one factor but it is not the most significant factor.”…..PNS (ENDS)





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Comments (2)Add Comment
Yeah right
written by The Samoa Fella, March 17, 2008
Read in between the lines and you will agree that the IMF's interest is not about clearing debt or allowing a country to develop but moreso to create a depenancy of developing nations to it's control and "suggestions" developing incentives increases employment oppotunities and income thuse allowing a realistic taxe regime on our people. Mr Mullins, in my opinion, and the IMF are more concerned with which nations and political powers we side with. As I have mentioned before in my last comment(Not printed) Find out where and who the money is coming from in Samoa and you will find the conditions and literally who is running our country! We need new leaders who understand world politics and the world economy!
Wow!
written by Martin, March 17, 2008
I couldn't help but marvel at this report. I would congratulate IMF about this extensive report. In other words the policy that Samoa and similar developing countries have ambitiously pursue is a right out failure. Lol. This report align well with the current economic condition why Samoan leaders have been pushed to be so bold with their implementations, such as a 180 on the right hand drive cars. History speaks for itself when the governenment ban the right hand drive cars they were clearing out to pursue foreign investments. Notably if you look at government webpages such as the Trade and Commerce.. it has not been updated and dated back to that era.. ie I would call it post-Y2K. Deregulations and privitatisations with incentives to encourage foreign investments the only problem was the "Stall scenario" occurred to our dearly Samoa. I call it stall scenario because .. when you set up a stall in the market or places like the Pacific Festival.. a lot of people come in and couldn't stop about how really good your products are .. and how very smart.. it is a great idea.. and they might try it.. HOW EVER NO ONE REALLY BUYS... hehe.. so there you are the stall scenario.. A lot of "WESTERN" economist scholars publish or comment about Samoa and similar countries approuch to the foreign investment.. the reality is.. only a few.. actually are intrested.. and those few who are intrested.. see it would be a bargin.. they try to squeez our government more.. which means if they get to have their way.. Business in Samoa by Samoa people pay more taxes and normal stuffs rather than those foreign invested companies.. with the concept that they provide Samoa with employment and cheaper services.. but looking from another reality .. the profit goes off island bigger because tax exemptions are there..
Anyways.. finally this report shows that the Samoan government's initiative to push foreign investment is a failure.. and the reason why it fails is because of the tax inicentive that most foreign investors do not really find attractive enough to invest in Samoa. To me is like this..talking to a boiler room broker when I call to demand my money back because his pitched last week is totally wrong.. he gives me more optimistic explanation that at the end calm my nerves but does not change the fact that he is conning me with my life savings and I stupidly belived it because I was greedy.

I hope it make sense.. if not.. well.. hey.. my mind jumps all over the place..
Cheers.. thanks for this article...
God bless..

Martin smilies/wink.gif

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