Many countries across the globe have put up measures in place to attract foreign investments with the aim of fostering economic development. This paper will examine business incentives that have been put in place by Australia and Brazil as a strategy of attracting foreign investments.
Australia is a thriving economy with a high Gross Domestic Product (GDP). This makes it one of the best destinations for investments. The current tax rate for corporate income is 30%. There was a time when suggestions were made to reduce the value but it was withdrawn in May 2012 (Lowtax, 2013). Currently, there are several tax incentives in various investment opportunities.
The most notable incentive is in the research and development field. Australia has put in place a tax credit of about 45%. It is refundable if a company is carrying out research and development (R & D).
However, this refund is only possible if the company’s gross receipts are less than $20 million dollars. If the company is still eligible in R&D but does not satisfy the above condition, then the tax amount that cannot b refunded is 40% (Lowtax, 2013).
The expenses that are used in defining the threshold include direct costs, supplies, staff costs, overheads, and capital expenditure. This incentive is targeting small and medium sized businesses. Another tax incentive in Australia is the 10% tax credit which is also refundable.
The latter is available to investors who are targeting R&D. The Australian government has put in place such a major tax benefit in order to increase new product development.
These tax reliefs target a wide range of business entities provided that they participate in the improvement of products or develop new and innovative processes, products, and devices. The government also offered assistance in training of personnel that participates in R&D (Lowtax, 2013).
When investing in Australia, 100% of a company’s shares can be owned by non-Australians. This is a decent incentive for enterprising foreign companies. Australia has no minimum capital required by foreign investors before establishing a business entity (Lowtax, 2013).
Other general incentives offered by the Australian government include efficient and prompt immigration procedures, tax exemption of certain products, and assistance in export market development (Lowtax, 2013). The Australian government offers all the necessary information relevant to site selection.
This enables investors to locate themselves in strategic points of production. The government of Australia has put in place all the relevant agencies and service providers. This incentive ensures that the establishment of a business entity is done with a lot of ease (Lowtax, 2013).
There is a program in Australia called ‘commercial ready’. This program was put in place with the aim of increasing investment opportunities. It offers $200 million dollars in terms of grants that are very competitive to medium sized business entities. Another incentive is business environment.
Investments targeting environmental improvement receive a grant of up to $500,000 dollars (Lowtax, 2013). The above incentives can be advanced to both the locals and foreigners. The presence of effective intellectual property laws has been prudent in securing foreign investors’ property (United Nations, 2004).
This is one of the best investment destinations in the world. Besides, political stability, and favorable economic policies are some of the attributes that qualify Australia as a perfect investment destination (United Nations, 2004).
Brazil is another major investment destination in the world bearing in mind that is one of the fastest growing economies (Pricewatercoopers, 2001). This growth is largely attributed to good local and foreign economic policies.
Brazil’s corporate tax is rated at 34% which may not be a very high figure compared to several other economies. The government has put in place incentives for any business entity working under the Lucro Real tax system (Pricewatercoopers, 2001)
The most noted incentive is a waiver that has been secured for R&D. It is one of the best in the world. It is currently at 160% deduction on taxation on a company that has R&D project in place. Any patent developed in Brazil enjoys an extra 20% tax reduction (Pricewatercoopers, 2001).
Other tax incentives in Brazil are found in the agricultural sector. Any business company investing in agriculture with a 10 year license is eligible for a tax reduction of up to 75%. However, the latter is subject to approval by the federal government (Pricewatercoopers, 2001).
If a company is located in the Manaus free trade zone, then it is also subject to gradual tax reduction if its projects are prioritized by the government. This tax reduction may go up to 38% (Pricewatercoopers, 2001).
Nontax incentives in Brazil are also numerous. There are fiscal incentive investments that any company in Brazil has a right to access. The government grants low-cost loans to companies planning to locate themselves in some regions. The government allows for freedom of investment (Pricewatercoopers, 2001).
Industries also receive incentives. One of the major incentives is the import duty reduction against imports that are not found in Brazil. The presence of a free trade zone in the Amazon offers a large market for any products manufactured within Brazil.
Companies located in Brazil’s export processing zone enjoy exemptions from taxes. There are three such regions in Brazil. They are largely underdeveloped and hence they need investment projects (Pricewatercoopers, 2001).
Brazil is obviously an attractive for investment. When Brazil is compared to Australia, the incentives in Brazil are definitely enormous but limited in a few investment regimes. Moreover, the availability of unexploited resources and markets in the Amazon region cannot be neglected.
References
Lowtax: Australia (2013). Venture Capital Investment Incentives. Web.
Pricewatercoopers. (2001). Doing Business and Investing in Brazil. Web.
United Nations (2004). Incentives: UNCTAD Series on Issues in International Investment Agreements. Web.