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A Global Tax Credit BARACK OBAMA has proposed that the United States double the amount it spends on foreign aid to $50 billion each year. But before promising to spend more taxpayer money, Mr. Obama and the other presidential candidates should look to reform our system of foreign aid by modeling it on the successful programs the United States has used to reduce domestic poverty. While foreign aid works in some situations, it has two huge problems. First, there is never enough money to go around. Last year, the United States provided $23 billion of development aid to foreign countries. This was more than any other donor, but it still resulted in very little for the billion people who live on less than $1 per day. The second problem is that the money that does get distributed doesn’t always reach the people who need it. As the economist Jeffrey Sachs has noted, of every dollar given to sub-Saharan Africa, only about 40 cents is actually directed toward economic development. The rest goes to debt service, consultants and humanitarian emergencies. And after those expenses are subtracted, the remaining money is further reduced by mismanagement and corruption. A solution to both problems would be to give tax credits to American companies that invest in qualified developing countries. A similar program that focuses on domestic poverty has been a resounding success. In 2000, Congress created a program giving businesses that invest in poor communities within the United States a tax credit equal to 39 percent of the cost of the investment. The theory was that poverty and joblessness in poor communities could be ended only by developing local businesses, not by an aid check. Seven years later, so many businesses want to invest in poor areas that only a quarter of the companies that applied for tax credits in 2006 received them. Using the domestic program as a template, Congress should provide a 39-cent tax credit for every dollar of American investment in developing countries. If Company X were to build a $100 million factory in Madagascar, its tax bill would be reduced by $39 million. The lost tax revenue would be offset by reducing direct foreign aid by the same amount. The power of substituting tax credits for lump sums of cash is that while the cash would bring at most $39 million to Madagascar, the tax credit results in a $100 million investment. For the same cost to the federal government, Madagascar receives far more resources. And by leveraging its foreign aid dollars, the United States is better off too, for reasons from the creation of new markets to alleviating conditions that may aid terrorist recruitment. Using tax credits instead of traditional foreign aid also means that the money will be spent more prudently. Because for-profit companies are focused on the bottom line, they will be more protective than government agencies of the money they invest in developing countries. Moving from inefficient direct aid to investment tax credits could lead to a fivefold increase in the capital that is deployed in developing countries. Of the $23 billion the United States spends on foreign aid, less than half reaches the ground. Providing $23 billion in tax credits, on the other hand, would lead to $59 billion of investment, if the domestic formula is applied abroad. Of course, the private sector is not always efficient, and not all of the money allocated to foreign aid should be converted to tax credits. But by involving the private sector, the United States could significantly increase the amount of money it spends in poor countries, without using any more taxpayer dollars. This tax credit program could reinforce goals other than economic growth. Credits could be awarded to countries that embrace “green” development or good governance. Eligibility could be restricted to new investment that creates jobs and transfers know-how to the poorest countries that do not compete directly with American workers. If Mr. Obama and the other presidential candidates in both parties think as creatively about helping the developing world as Congress did about alleviating domestic poverty, then foreign aid can be transformed from a faltering effort into one that brings the fruits of globalization to poor countries. Justin Muzinich works for a hedge fund in Connecticut. Eric Werker is an assistant professor at Harvard Business School. http://www.nytimes.com/2007/10/20/opinion/20werker.html?_r=2… |
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| aus der Diskussion: | Entwicklungshilfe - Verschwendung von Milliarden Steuergeldern |
| Autor (Datum des Eintrages): | CaptainFutures (21.10.07 12:34:47) |
| Beitrag: | 26 von 40 (ID:32096895) |
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