Regional State Aid: Market Definition in Large Investment Projects of the Automotive Industry

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“…On the other hand, tax holidays may be problematic particularly if they target sectors or activities, raising the question of the treatment of firms already engaged in that sector or activity or in other sectors or activities that do not qualify. Tax holidays are generally least attractive to firms in sectors that require long-term capital commitments and that cannot realise immediate profits (OECD, 2001 [25]).…”

“…As with tax holidays, targeting such measures at income from a subset of activities or investors can be problematic as it can cause tax avoidance and revenue leakage. Statutory corporate tax reduction invites tax avoidance through high-tax enterprises shifting profits to low-tax ones via transfer pricing (intra-country and international) (OECD, 2001 [25]).…”

“…In the case of the former, a specific percentage is deducted directly from taxable income; therefore it also depends on the value of the corporate income tax rate. On the other hand, the value of the corporate tax does have an impact on the value of the investment tax credit (OECD, 2001 [25]). The advantage of the capital cost allowances is that the revenue cost is directly related to the amount of the investment, so there is no need for minimum eligibility thresholds.…”

“…Financing incentives such as dividend withholding tax rate reductions and imputation relief, provide an offset to corporate tax on distributed profit. In certain cases they may lower the discount rate applied by foreign investors to after-tax cash flows from FDI (OECD, 2001 [25]).…”