Effects of tax exemption on ivestment by industrial firms in Colombia

offer inducements to approved enterprises in the form of reductions in or exemptions from ... income taxes for given periods of time." Despite much accumulated experience, disagreement still exists about their effectiveness. In this paper the effects of tax exemptions in Colombia during the period 1960-66 are examined in an effort to add more explicit empirical evidence to the debate. The basic question here is: To what extent have Colombia"s tax exemptions encouraged firms to enter (or to expand in) areas of industry they otherwise would not have chosen? The organization of the paper is as follows: Section I offers some historical background to the 1960 tax-exemption statute. Section II briefly reviews certain administrative procedures and problems. Sections III to V contain the economic evidence. And finally, Section VI summarizes the evidence and presents policy implications.