The current aim of CARICOM is to develop policies that encourage regional integration and transformation to the CSME. On the agenda to support the integration process is the full introduction of a tax harmonization framework. The harmful effects of tax competition have been the main stimuli for wanting to harmonize taxes. Tax structures and rates are important determinants for foreign and local businesses and consumers in deciding where to conduct investment operations. Decreasing tax rates results in a rise in income and revenues to existing tax payers, which enhances the ability for trade and investment within the CSME as shown from the experience of the EU. Latin American economies have shown that liberalization, deregulation – especially in the capital market – and the implementation of a CET induces FDI to that region. The investment levels in CARICOM should expect mixed results from tax harmonization, based on current tax rates and elasticity of Member States
