The course objective is to introduce students to:
Do taxes matter for domestic and foreign direct investment? What (direct and induced) effects are expected from tax policy measures? What are the implications for the effectiveness of tax incentives? Are there tax-induced distortions?
These are some questions that the course deals with. In the introduction, fiscal policy is defined : the term is used in the course with a broad meaning including any investment incentives (capital grants, for instance). Then the effects of tax policy on financial policy and on investment decision are in turn examined. Every chapter introduces the feasible policies, the indicators for assessing public choices and the tax-induced arrangements made by corporations, and the controversies in recent economic literature. Various scenarios are analysed : a closed economy and an open economy including the specific international tax devices. Some exercises enable to assess the Belgian tax policy since 1965 and the expected effects of an harmonization in Europe.
Both points of view of the policy maker and the entreprise are considered during the lecture. Frequent references to national and international news are made.
Introduction Part 1: Tax policy and the investment and location decisions of the firm Part 2: Tax policy and the financing decision of the investment (introduction of the shareholder)
written exam (70%) + homeworks by groups (30%)
ARMITRAGE S. , The Cost of Capital, Intermediate Theory, Cambridge University Press, 2005. CLARK W.S., Tax Effects on Foreign Direct Investment, Recent Evidence and Policy Analysis, OECD Tax Policy Studies, 2007.