Export incentive

Export incentive
See also

Export incentive is main ingredient of trade policy. It is exception to the general tax regime. It enables exporters to bring down prices without reducing their net profits. It has a positive impact on exports but in the same time it is causing loss of the government revenue. Export incentives are political attractive because their costs are less visible than that of other export promotion policies that engage explicit budget outlays. Export incentives, fiscal incentives and export promotions are significant part of economy's trade strategy. These strategies are crucial to reinforce the productivity of all sectors and to maintain international competitiveness [1].

Form and extent of export incentives diverge from country to country according as the country's economic stucture. Depends on overall budget country has to choose the best structure of export incentives to be able to achieve the objective of export promotion [2].

The rationale for using export incentives[edit]

Export incentives are used for the following reasons [3] :

  • depreciation of the exchange rate, which increments the profitability of exports,
  • high import content of export items can limit the incentive effect,
  • export incentives are more efective in targeting concrete exports, mainly value added and emerging exports.

Examples of export incentives[edit]

The most famous examples of export incentives are [4]:

  • lower income tax rates,
  • cash incentives,
  • tax incentives ( tax holidays, reduced tax rates on profits or income, lower tariffs on imported equipment, allowing accelerated depreciation),
  • zero-rating sales tax,
  • concessional export finance,
  • exemption from export duties.

Footnotes[edit]

  1. Imtiaz A., 2015, p.100
  2. Ahuja R.,2001, p.4
  3. Imtiaz A., 2015, p.100
  4. Imtiaz A., 2015, p.100

References[edit]

Author: Agnieszka Bednarek