Should Countries Lower Taxes to Attract Investments?

Countries usually have a fixed tax rate, some around 20%, some 18%, some 27% but the tax varies. Some countries tax everything from revenue to products which are considered luxury. Other countries tax alcohol and cigarettes, discouraging people from purchasing them. Some countries have no taxes on essential food and beverage items. But, businesses need to work and invest somewhere. Should countries lower their taxes to maximize profit and investments?

Gambling Laws – Very Profitable Investments

profit loss 218x300 - Should Countries Lower Taxes to Attract Investments?A good example of a country basically inviting foreign businesses is Malta. Malta is on the Mediterranean and is a very small country with a lot of people on its couple of islands. They are also one of the biggest gambling license providers in the world.

In 2004, they changed their approach to gambling with what is called the Remote Gaming Act (gambling is often called gaming to avoid negative associations with gambling). This act allows them to issue licenses to businesses which are based in Malta but operate online. They have four classes of license. Class 1 is for casinos and table games, as well as poker and lotteries. Class 2 is for fixed betting odds, pools and spread betting, or betting on an outcome of an event. Class 3 is for betting exchanged and P2P betting. Class 4 is for software vendors.

All of these are cogs which are necessary to have a functional online gambling industry. The Maltese government is very rigorous when it comes to regulating companies who operate under their licenses. Small infractions are often important enough for a license to be revoked.

Lower Taxes Might Mean Higher Risk

When lowering taxes, countries encourage businesses to take higher risks. In case those risks pay off, then companies will be earning more money. More money is always good, as a larger sum is eventually taxed. Lowering taxes also enables smaller businesses. Businesses, however small, still earn money. The more businesses, more money is circulating through the system.

Foreign investors are particularly fond of lower taxes. Dropping the taxes by a few percent is enough to encourage investors to start looking at a country, rather than its neighbor.

Lower Taxes Also Invite Non-Residents

tax forms business 275x300 - Should Countries Lower Taxes to Attract Investments?Non-residents can look to open businesses in countries which have lower taxes. Corporate business is one thing but smaller businesses can also earn a lot of money. Inviting non-residents to open their businesses, if not directly, then by lowering taxes, would be beneficial.

While corporate giants will likely invest in countries where there are great market opportunities, possibly ignoring some minor tax decrease, smaller businesses will likely be the ones to flourish. Smaller businesses can operate on a local scale and their profits, while a lot smaller than corporate ones, are also sufficient to sustain the business and even expand.

Countries with Low Capital Tax are Relatively Rich

Some of the countries of this world are doing better than the rest. A lot of these countries are doing fine, financially, and so are their citizens. Among these countries with low capital tax are Switzerland, Monaco, The Cayman Islands, Belize, New Zealand and Hong Kong (although Hong Kong is not really a country in the strict meaning of the word).

These some of the ways countries could benefit from lowering their taxes, and not just one type of tax, but multiple ones. Learning from the richer countries is a good way to improve.