A Tripartite Governance Strategy for Infrastructure REITs Considering Tax Incentives and Antiavoidance Regulations

Abstract

Tax incentives are a powerful driver for the development of infrastructure real estate investment trusts (REITs). Complementary antiavoidance regulations are essential to ensure the sustainable and healthy development of the REIT market. This paper breaks through the traditional policy approach that emphasizes incentives but neglects supervision. Based on factors such as information asymmetry and regulatory capture, a tripartite game model of REIT tax incentives and antiavoidance regulation is established. Utilizing global REIT policy and market data, the paper sets parameter values and conducts numerical simulations to explore the dynamic strategic interaction mechanisms among the government, REIT stakeholders, and financial regulators. The study finds that (1) government’s tax incentive policies and regulatory strategies show a phase transition characteristic with the changes of REIT market returns; and (2) based on the project’s profit status, financial regulators and investors are prone to develop a collusive avoidance evolutionary strategy. Therefore, antiavoidance regulations and mechanisms to prevent regulatory capture should be implemented in tandem to ensure the efficiency of tax incentives. The conclusion of the study provides a theoretical basis for the formulation of REIT tax incentive policy and the promotion of the sustainable development of the REIT market.