Tax Incentives for Private Investment in Developing Countries

267 Pages·1979·8.012 MB·English

by  Robert Anthoine (auth.), Robert Anthoine (eds.)

TAX INCENTIVES
FOR PRIVATE INVESTMENT
IN DEVELOPING COUNTRIES
INTERNATIONAL BAR ASSOCIATION
Tax Committee, Section on Business Law
TAX INCENTIVES
FOR PRIVATE INVESTMENT
IN DEVELOPING COUNTRIES
Reporter:
Robert Anthoine
Partner of Winthrop, Stimson, Putnam & Roberts
Adjunct Professor of Law,
Columbia University
1979
Springer-Science+Business Media, B.V.
Cover design: Pieter J. van der Sman
Library of Congress Cataloging in Publication Data
Main entry under title:
Tax incentives for private investment in developin,g countries.
At head of title: International Bar Association.
1. Underdeveloped areas - Taxation - Addresses, essays, lectures. 2. Underdeveloped
areas - Investments, Foreign -Law and legislation -Addresses, essays, lectures. I. Anthoine,
&obert. II. Internaltional Bar Association.
K4528.Z9T39 343.04'09172' 4 79-18798
ISBN 978-94-017-4471-3 ISBN 978-94-017-4469-0 (eBook)
DOI 10.1007/978-94-017-4469-0
© 1979 Springer Science+B usiness Media Dordrecht
Originally published by Kluwer, Deventer, The Netherlands 1979
Softcover reprint of the hardcover 1st edition 1979
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form by any means, electronic, mechanical, photocopying,
recording or otherwise, without the written permission of the publisher.
Table of Contents
About the IBA Section on Business Law . VII
Chairman's Page IX
Preface by the Chairman of the Tax Committee . XI
Editor's Preface . XIII
Statement of Reporter, Robert Ant/wine 1
Statements of Developed Countries 15
Australia by Kevin J. Edwards . 17
Austria by Dr. Heinz H. Lober . 41
Belgium by Dr. R. D. de Broglio 47
Canada by James Scott Peterson and Robert Anthoine . 51
Denmark by Svend Oppenhejm . 59
France by J. C. Goldsmith 61
Federal Republic of Germany by Reinhard Poellath 75
Italy by Giuseppe Bisconti and Bruno Gangemi 107
Japan by Gary M. Thomas . 113
Netherlands by A. Hartman . 139
Sweden by Sten Sandell and Torbjorn Skold 151
Switzerland by Dr. Robert Briner . 153
United Kingdom by Peter M. B. Rowland 159
United States of America by Robert Anthoine 167
Summary of Other Developed Country Laws 177
Finland . 177
Ireland . 178
New Zealand 178
Norway .. 178
South Africa 179
Statements of Developing Countries 181
Argentina by Pedro de Elizalde 183
Brazil by J. F. Gouvea Vieira . 187
Greece by George Stathopoulos 215
Guatemala by Sergio Garcia Granados 225
India by Vasant P. Mehta . 231
Morocco by Seddik Zaari . . 251
Spain by Dr. Bernardo Ma Cremades 261
Yugoslavia by Miodrag P. Popovic . 263
v
About the ffiA Section on Business Law
The Section on Business Law was formed in 1970 to promote an interchange
of information among Members as to laws, practices and procedures affecting
business, financial and commercial activities throughout the world. It works
through the following 20 Committees:
(A) Maritime and transport law
{B) Aeronauticallaw
{C) Antitrust law and monopolies
(D) Procedures for settling disputes
(E) Commercial banking
(F) Environmentallaw
(G) Business organizations
(H) Insurance
(I) Investment companies funds and trusts
(J) Creditors' rights, insolvency, liquidations and reorganizations
(K) Public utilities
(L) Patents, trademarks, copyrights
(M) Sales of goods
(N) Taxes
(0) Energy and natural resources
(P) Labour law
(0) Issues and trading in securities
(S) Consumer affairs, advertising, unfair competition and products liability
(T) International construction contracts
(U) Savings and building societies
The Section publishes the International Business Lawyer and arranges Con
ferences and Seminars. Membership enables lawyers to make contact with others
practising in the same fields and to contribute to law reforms of direct interest
to the practising lawyer.
Further details of the Section and how to join may be obtained from the mA,
Byron House, 7-9 StJames's Street, London SWlA lEE, England.
vn
Chairman's page
'Tax Incentives for Private Investment in Developing Countries' are an im
portant aspect of the so-called North-South Dialogue and the transfer of tech
nology from industrial countries to developing countries. The Section on
Business Law of the International Bar Association is greatly indebted to the
Editor, Robert Anthoine, the Chairman of the Committee on Taxes, Jean-Claude
Goldsmith, its Vice-Chairmen, John H. Young and Raoul Lenz, and the members
of the Committee, Who have contributed, for their joint efforts in preparing this
first book of the Committee on Taxes.
It has been written by practising lawyers with the knowledge and experience
of their own daily work but also with the knowledge of what a practitioner is
looking for.
I am confident that this book will prove of real assistance to practising lawyers
world-wide, as did previous publications of other Committees of the Section on
Business Law. I wish it full succes.
I hope that you may wish to join the Section on Business Law and thereby
make contact and work with lawyers with similar interests in commercial law.
Dr. Walter Oppenhoff
Chairman of the Section on Business Law
IX
Preface by the Chairman of the Tax
Committee
Dear friends and colleagues,
Our Committee is now in its ninth year of existence since it was formed,
concurrently with the Business Section as a whole, at the IBA Congress in
Tokyo in 1970.
A number of topics have since been selected for their highly practical
implications, and considered and discussed at the Committee meetings. A good
number of them were covered by reports in writing which were published in
The International Business Lawyer or in Tax Management. Others were pre
sented and surveyed in the form of a panel-floor exchange of views on the
seminar model.
Until now, none have resulted in the publication of a full book. The main
reason is that it is not very easy to achieve the harmonization and editing of
national reports in a single language, even on the basis of a specific and detailed
questionnaire.
This gap is now filled up by the issue of two books published by Kluwer Law
and Taxation Publishers, one on 'Tax Incentives for Private Investment in
Developing Countries' and the other on 'Tax Status of Regional Headquarters
of Multinational Companies'.
It is my personal pleasure and pride to introduce the book on tax incentives,
indeed a most important subject in international business. I hope it may prove
to be a useful companion in your practice.
I look forward to our next meeting in Zurich.
With my best regards,
Yours sincerely
J. C. Goldsmith
Chairman-Committee 'N' : 'Taxes'
Section on Business Law
XI
Editor's Preface
The purpose of this book is to provide within a single volume a comparative
analysis of the tax laws of developed countries bearing upon direct private
investment in developing countries, and a representative sample of developing
country laws bearing upon the receipt of such investment. This study was
initiated by the Tax Committee of the Business Section of the International Bar
Association under the leadership of Jean-Claude Goldsmith of the Paris Bar.
I undertook to act as the reporter, to browbeat colleagues in other countries to
write national reports, and to provide the reporter's overview statement.
This report includes studies of fourteen developed countries prepared by
national reporters and summaries of five other developed country laws. Note
worthy are the detailed examinations of the laws of the Federal Republic of
Germany and of Japan, the two developed countries that have provided the
most comprehensive system of incentives for private investment in developing
countries. Also contained herein are reports from eight developing countries,
including a thorough examination of the laws of Brazil.
Attention is paid in the developed country reports not only to those tax
provisions that act as in inducement to foreign investment but also to those that
favor domestic investment and hence act as a disincentive to foreign investment.
Relevant double taxation agreements are discussed, and other aspects such as
exchange control and government grants are also mentioned.
I am grateful to the national reporters who took the time from their busy
practices to prepare reports which en masse provide an excellent view of the
current state of tax incentives for private investment in developing countries.
New York, New York Robert Anthoine
May, 1979
XIII
Statement of Reporter
Robert Anthoine
INTRODUCTION
The Tax Committee of the Business Section of the International Bar Asso
ciation under the leadership of Jean-Claude Goldsmith of the Paris bar has
initiated a project to study tax incentives for private investment in developing
countries.! The Association sought to fill a need for systematic study of tax
incentives in law and in practice. No other body is engaged in such work,
including the United Nations, which over the years has played the most signif
icant role in identifying and supporting the interests of the developing coun
tries.2
Your Reporter submitted a preliminary Report at the Business Section meet
ing in Atlanta in November, 1977 and a substantially complete report at the
biannual meeting in Sydney in September, 1978. This is his final report.
SCOPE OF STUDY
This Report is addressed primarily to the tax laws of the developed countries
but reports from a number of developing countries are included. A complete
study limited even to the tax factor should include not only the provisions of
developed country laws that induce foreign investments but also those that
favor domestic investment and hence act as a disincentive to foreign invest
ment. Likewise the tax laws of developing countries should be examined not
1. For recent publications on this subject see Anthoine, Tax Systems of Major Capital
Exporting Countries: An Examination of Incentives for Private Investment at Home and
in Developing Countries, 32 Tax Law Rev. 323 (1977); Bryan, Developed Nation Tax Law
and Investment in LDC's, Columbia Journal of Transnational Law, July, 1978.
2. Tax Treaties Between Developed and Developing Countries (UN Sales No. E.69.XVI.2);
Tax Treaties Between Developed and Developing Countries, Second Report (UN Sales No.
E.71.XVI.2); Tax Treaties Between Developed and Developing Countries, Third Report
(UN Sales No. E.72.XVI.4); Tax Treaties Between Developed and Developing Countries,
Fourth Report (UN Sales No. E.73.XVI.4); Tax Treaties Between Developed and Develop
ing Countries, Fifth Report (UN Sales No. E.75.XVI.1); Tax Treaties Between
Developed and Developing Countries, Sixth Report (UN Sales No. E.76.XVI.3); Tax
Treaties Between Developed and Developing Countries, Seventh Report (UN Sales No.
E.78.XVI.1); Guidelines for Tax Treaties Between Developed and Developing Countries
(UN Sales No. E.74.XVI.5). See also Muten, 'Appropriate Tax Systems for Developing
Countries', in Associated Business Programmes Ltd., International Tax Conference, Nairobi
(1976); Shoup, 'Report on Tax Incentives in Developing Countries' (December, 1975), an
unpublished report prepared for the United Nations Centre for Development Planning,
Projections and Policies; United Nations: Economic and Social Council: 'The Impact of
Multinational Corporations on the Development Process and on International Relations',
E/5500/Add 1/Rev. 1-St/ESA/6 (1974).
1