Essay: Tax Incentives

Sample Essay

The Act also includes incentives for companies which employ capital expenditure for the purpose of research and development for increasing the ability to produce goods or provide services. All companies which fall under this category are taxed at a rate ranging from 10 to 13 percent while the actual standard tax rate is 18 percent and tax incentives are also provided on dividends of these companies. The expansion incentives on the other hand involve incentives provided to companies which focus on automating production and service processes. The incremental income earned by a company after expansion through automation is exempted from tax under this incentive. The incentives given for development and expansion encourage companies to automate processes and invest in research and development of innovative products and services.

The companies which focus on increasing exports each year are also provided with tax benefits by exempting 90 percent tax from incremental export income which a company earns in a year. This entails that if a company increases its export in a certain year as compared to previous year of operation 90 percent of income from additional export would be exempted from tax with tax incentives on dividends of these companies similar to other companies. The main objective for providing this incentive is to motivate companies in increasing exports in to gain a larger amount of income with very low taxes. The adverse effect of this incentive would be that companies export their products and services without consideration of local demand in search of higher net income through export tax incentives[1].

[1] United Nations. “Tax Incentives and Foreign Direct Investment”. Global Survey, New York: United Nations, 2000.

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