Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Corporate Tax in Developing Countries: Current Trends and Design Issues

Corporate Tax in Developing Countries: Current Trends and Design Issues

Laura Abramovsky, Alexander Klemm and David Phillips
Journal article | Fiscal Studies, Vol. 35, No. 4, December 2014

This paper looks at corporate income taxes in developing countries from both an empirical and a theoretical perspective. Many economic principles about corporate income taxes apply equally in advanced and developing economies, but some characteristics of developing economies lead to different trade-offs. These include fewer locational rents and generally lower administrative capacity. Empirically, corporate income tax developments broadly resemble those in advanced economies, but there are important differences too, such as a greater reliance on tax incentives, reflected in a gradual narrowing – rather than broadening – of tax bases in combination with tax cuts. Detailed analysis using effective tax rates reveals various distortions including a preference for certain assets, and strong tax advantages of debt finance over equity finance, particularly in high-inflation environments. An empirical analysis of correlations between country-specific features and the likelihood of using tax incentives shows that countries offering low tax rates also tend to offer tax incentives, but that they cut their standard rates by substantially less than other countries between 1996 and 2007.

More on this topic

User Guides
An introduction to tax policy costing: a manual and worked examples.
User Guides
A guide to assessing the effectives and potential impacts of alternative tax policy options.
Report
The COVID-19 pandemic has hit sub-Saharan African economies hard, exacerbating debt and debt servicing cost issues that a range of countries in the region – including Ghana and Nigeria – already faced. This report examines the fiscal context in sub-Saharan Africa and the issues and options for ...
Report
In this report, we provide a comprehensive overview of Ghana’s tax system. This is intended as a repository of key information for researchers, policymakers and the public, as well as highlighting aggregate patterns of note as a first step for identifying challenges and areas for reform.
External publication
We characterize optimal enforcement and taxation policies as functions of revenue elasticities and measures of taxpayer hardship. We estimate these parameters using multiple sources of variation and administrative data from Mexico City.