Tax Credits for Debt Reduction

Helpman, Elhanan

Abstract

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Tax Credits for Debt Reduction

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

June 1992

NBER Working Paper No. w3137

Abstract:
The incentives for domestic investment in debtor countries are influenced by the terms of their external obligations and by the system of taxation utilized to provide government revenue for debt payments. It is well known that existing debt contracts could be altered to improve the incentives for investment but this has proven difficult to accomplish, perhaps because individual creditors have incentives not to agree to such changes. In this paper we show that a simple tax credit scheme that can be implemented unilaterally by the debtor government can overcome at least some of the inefficiencies caused by existing debt contracts.

Number of Pages in PDF File: 24

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Date posted: April 18, 2007

Suggested Citation

Helpman, Elhanan, Tax Credits for Debt Reduction (June 1992). NBER Working Paper No. w3137. Available at SSRN: http://ssrn.com/abstract=980442

Contact Information

Elhanan Helpman Harvard University - Department of Economics ( email ) Littauer Center Cambridge, MA 02138 United States 617-495-4690 (Phone)
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States
Centre for Economic Policy Research (CEPR) 77 Bastwick Street London, EC1V 3PZ United Kingdom