Expenditure-Based Investment Tax Breaks Have Merit, OECD Says

Expenditure-based investment tax incentives can provide more value for money than income-based incentives and should be considered by policymakers as the basis for new incentive design, the OECD said Monday.

Income-based incentives, which provide tax exemptions and refunds, can exacerbate profit shifting, while expenditure-based incentives, like tax credits or accelerated depreciation, can be designed to tie relief in direct proportion to desired firm investment, according to the Organization for Economic Cooperation and Development’s Practical Guide to Investment Tax Incentives report.

Under the OECD’s 15% global minimum tax framework, expenditure-based tax incentives can reduce a company’s effective tax rate, potentially leaving ...