The recent international financialcrisis dealt a hard blow to the region's growthprospects, being reflected in reduced demand for financialservices and tourism as well as falling remittances. Thiswas combined in some cases with home grown macroeconomicimbalances and the need to face the costs of financialsector bailouts in other countries. More recently,policymakers have indicated the need to explore the use oftax incentives in order to foster much needed privateinvestment. This policy note analyzes the issues associatedwith the use of tax incentives and reviews the challengesfaced by the region, which has had a not altogethersuccessful experience in controlling tax expenditures. Thepolicy note is organized as follows: the first sectionexplores the diverse nature of the Caribbean and LatinAmerican group of countries referred to in this note: theBahamas, Barbados, Belize, Dominican Republic, Guyana,Haiti, Jamaica, Suriname and Trinidad and Tobago. This isfollowed by a word of caution regarding the emphasis onfactor accumulation in explaining growth, dampeningbeforehand any unrealistic expectations regarding growthpromoting tax incentives. A brief analytical review of themain direct and indirect tax instruments is included insection three. Section four discusses features of good taxincentive systems. Section five reviews some countryexperience with provision of tax relief. Last section givesa brief set of recommendations.
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