Toward a Negative Definition of Tax Incentives

Abstract

When I was preparing to attend Tax Analysts' Tax Incentives roundtable on April 7, 2006, I wondered how a tax incentive should be defined at the margin. For instance, could the exemption system of double taxation avoidance itself be a tax incentive for non-domestic investment, and if so, where should the line be drawn between incentives and non-incentives? Would it be helpful to think, not just about what tax incentives are, but also what they are not? When one of the roundtable speakers identified the title passage rule as a particularly egregious incentive, I decided to explore this issue using the title passage rule as a template.

Keywords: tax incentive, tax subsidy, ETI, extraterritorial income exclusion, title passage rule, risk of loss

JEL Classification: K33, K34