Flavio Maluf Explains The Purpose Of Financial Incentives

Financial incentives have one ultimate goal says Flavio Maluf. It is to stimulate economic activity. There are many different mechanisms on how financial incentives can achieve this goal states Flavio Maluf, who is now president of a large Brazilian company called Eucatex.

Financial incentives can try and lure businesses to set up shop in a new city, town or region. This is achieved through the use of tax breaks. For example, a city may offer no taxes for a period of 10 years to get a company to relocate to their city. They may also provide reduced taxes or free land for corporations.

When businesses set up shop in a city, they create jobs for the locals. This stimulates economic activity in the area. New jobs can also mean higher wages and more opportunity for people. So even with tax breaks, a city and its people benefit from the tax breaks.

Another form of financial incentive is a little more complicated. It involves allowing businesses to write off investments in workers, equipment, and plants instead of paying city, state or national taxes. This has a similar effect on workers and the area. More jobs can be created as a company expands. Higher pay may result, and economic activity generally expands.

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The focus of financial incentives is encouraging corporate and small business growth. If there is little to no business or corporate presence, then the focus is to attract these companies and businesses to relocate. Of course, financial incentives should not allow firms or corporations to get away without paying any share of taxes duly owed to local, state and national governments. They need to contribute, but it is in everybody’s interest to have a thriving and stable corporate presence in their region. That is the crux of the financial incentive policy adopted by many Brazilian officials says Flavio Maluf.

Mr. Maluf is following the footsteps of his family by serving as the chief executive officer and president of Eucatex. It is one of Brazil’s largest firms and exports many products abroad. Flavio Maluf also believes that despite being a leader in its industry, Eucatex can continue to grow and expand its presence in many market segments.

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