Tax

Tax and Development Programme: Curbing Wasteful Tax Incentives

 

Under pressure to offer internationally-competitive tax environments, developing countries offer generous tax breaks that undermine their domestic resource mobilisation efforts with little demonstrable benefit in terms of increased investment. To assist developing countries, the Task Force on Tax and Development has developed a set of Principles to Enhance the Transparency and Governance of Tax Incentives for Developing Countries.

 

The Tax and Development Programme (TDP) uses these Principles as a standard diagnostic framework for demand-driven analysis of tax incentives in developing countries to provide practical recommendations on improving revenue mobilisation and attracting the right kind of investment.

First countries reviewed
Zambia, Tunisia, Ghana, Costa Rica, Myanmar, Nigeria, Swaziland, Vietnam, and Kazakhstan
The Tax and Development Programme worked closely with the IMF, the World Bank Group, and the UN, developing guidance on the design and governance of tax incentives

Regional work with the Southern African Development Community (SADC) allowed for in-depth analysis of tax incentives in the 14 SADC Member States, revealing the challenges that individual SADC countries face when offering tax incentives and the long‑term costs from regional tax competition.

Options for Low Income Countries’ Effective and Efficient Use of Tax Incentives for Investment

 

The G20’s Development Working Group (DWG) invited four International Organisations (IMF, OECD, UN and World Bank) to write a report on options for low income countries’ effective and efficient use of tax incentives for investment. The underlying concern of the DWG is that low income countries often face acute pressures to attract investment by offering tax incentives, which then erode the countries’ tax bases with little demonstrable benefit in terms of increased investment. The International Organisations were asked to use their shared expertise—based on many years of country interactions and analysis—to assist low income countries in making better use of tax incentives.

 

Drawing on recent country experiences and an extensive range of academic and other studies, the International Organisations prepared a report aiming to take a fresh look at tax incentive policies in low income countries. The report offers guidance on the design and governance of tax incentives and suggests good practices in these areas. Since much of the pressure to offer incentives stems from an awareness of those offered by other countries, the report also discusses options for international coordination to address the risk of mutually damaging spillovers from such tax competition.

 

Finally, a separate background document reviews practical tools and models that can help assess the costs and benefits of tax incentives, which is essential to enhance transparency and support informed decision making.

 

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Published on November 06, 2015

 

 

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