Export incentive
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 structure. 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
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 effective in targeting concrete exports, mainly value added and emerging exports.
Examples of export incentives
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
| Export incentive — recommended articles |
| Price control — Galloping inflation — Barriers to trade — Over-valued currency — Emerging market economy — Non-tariff barriers — Income Shifting — Barriers to exit — Effects of tourism development |
References
- Ahuja R.,(2001) Export incentives in India within WTO framework, Working Paper NO. 72; Indian Council for Research on International Economic Relations Core-6A, 4th Floor, India Habitat Centre, Lodi Road, New Delhi-110 003
- Arozamena L., Weinschelbaum F.,(2012) Incentive Schemes in Export and Investment Promotions, IDB Publications (Working Papers) 4090, Inter-American Development Bank.
- Broll U., Wong K.P., (2014) Ambiguity and the incentive to export , Dresden Discussion Paper Series in Economics 01/14, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics
- Gebreyesus M., Demile A., (2017) Why export promotion efforts failed to deliver? Assessment of the export incentives and their implementation in Ethiopia, Working Papers 017, Ethiopian Development Research Institute
- Imtiaz A.,(2015) The Value of Export Incentives Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(2), July-Dec.
- Ledyayeva S., (2017) Export incentives and global value chains Economics and Business working paper series 2017(2), UCL School of Slavonic and East European Studies
- Penteado Neto P., (2012) International Trade Subsidy Rules and Tax and Financial Export Incentives: From Limitations on Fiscal Sovereignty to Development-inducing Mechanisms AuthorHouse, Cambridge
Author: Agnieszka Bednarek
