Corporate taxation , effective average tax rate , tax incentives , Asia
Abstract:
This paper investigates the taxation of investments in the Asia-Pacific region. Our analysis is based on
the methodology of Devereux and Griffith (1999, 2003) for determining effective average tax rates.
This approach allows us to account for important national and international tax regulations. Our results
show that the overall dispersion of effective tax burdens in Asia-Pacific ranges from 10.6% in Hong
Kong to 40.4% in India for domestic investments (overall average of 23.4%). In 8 out of 19
jurisdictions covered, investments are, however, effectively taxed at a rate between 20% and 25%. If
the investment is made by a foreign investor, cross-border taxation has a significant impact on the
overall tax burden. In any of the Asia-Pacific jurisdictions, foreign direct investments by a
Singaporean or a German parent company are on average taxed at 29.2% and at 32.8% in case of a US
investor. Meanwhile, tax incentives for the stimulation of private investment reduce the effective
average tax rate by 8.6 percentage points on average. Fiscal incentives targeted at investments in the
high technology sector or the development of specific geographic areas result in the lowest effective tax burdens.
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