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Best Practices: Tax Incentives to Technology Adoption and Economic Growth - VAT Elimination on PCsPublished by: IDC Published: Aug. 16, 2009 - 23 Pages Table of ContentsTable of Contents Government Insights Opinion In This Report Situation Overview IntroductionStrategic Analysis of Technology InvestmentWorker Productivity and ICT InvestmentMarginal Productivity of ICT Capital Versus Physical CapitalPrice Elasticity of Demand of Desktop and Portable PCsEconomic Analysis: Costs and Fiscal Benefits of Tax ExclusionStep 1: Evaluation of Fiscal Revenue DropStep 2: Impact of Final Price ReductionsStep 3: Multiplying Effect of PC Purchases on ICTStep 4: Elasticity of GDP Against Increments in ICT InvestmentStep 5: Evaluation of Fiscal Revenue IncrementsSteps 6 and 7: Calculation of Expected Present Net Value of Fiscal Revenue and Total Cost-Benefit EvaluationThe Colombian CaseReduction of Taxes on PC PurchasesThe Impact on PricesThe Behavior of DemandPrice Elasticity of DemandResults on Tax CollectionIndirect ResultsFuture Outlook Essential Guidance Actions to ConsiderLearn More Related ResearchSynopsisTable: Cost-Benefit Analysis of Value-Added Tax Elimination on PCs in Argentina and Peru Table: Colombia Notebook PC Average Sales Values, 3Q06–4Q07 Table: Colombia Desktop PC Average Sales Values, 3Q06–4Q07 Table: Colombia Fiscal Impact of PC Value-Added Tax Exclusion, 2006–2008 Figure: Sequence of Analysis of Economic Impact of ICT Tax Reduction Figure: Relationship Between ICT as a Percentage of GDP and Worker Productivity Figure: Argentina Notebook PC Shipments and Average Sales Values, 1995–2007 Figure: Latin America/Caribbean Applied Value-Added Tax Rates by Country, 2007 Figure: Latin America/Caribbean Indirect Taxes as a Percentage of GDP by Country, 2006 Figure: Latin America/Caribbean Direct Taxes as a Percentage of GDP by Country, 2006 Figure: Basic GDP Versus ICT Elasticity Model Figure: Latin America Public Income as a Percentage of GDP by Country, 2005 Figure: Colombia Desktop and Notebook PC Shipments, 1Q96–4Q08 Figure: Colombia Desktop PC Shipments and Average Sales Values, 1996–2007 Figure: Colombia Notebook PC Shipments and Average Sales Values, 1996–2007 AbstractThis Government Insights report is a compilation of lessons learned during the past half decade in Latin American countries, but that can be applied to the majority of nations seeking to stimulate growth and competitiveness via increased technology adoption. The impact of technology on the productivity of individuals, enterprises, industries, and nations is so strong that assignment of taxes on the investment on technology generates concerns about its strategic and economic convenience. Such concerns are stronger if taxes actually reduce the net flow of tax collection. A series of studies done by IDC/Government Insights in Colombia (2001, 2006, and 2008), Argentina (2008), and Peru (2008) aimed to understand the impact of excluding technology from value-added tax (VAT). The benefits found are numerous. They go beyond the direct increase in income tax collection due to greater demand at lower prices and into the economic effects of increased worker productivity and country competitiveness. "Tax reduction does not necessarily mean tax sacrifice. In the case of technology, it might mean an actual increase in collected tax revenue and definitely an increased competitiveness that results in higher GDP growth," said Ricardo Villate, vice president, Research and Consulting of IDC Latin America. Get Full Details About This Report >> |
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