This practical guide aims to support policymakers and practitioners, particularly in developing economies, to better design and implement investment tax incentives. It provides guidance across the entire tax incentive lifecycle, from conception to design, implementation, monitoring, and evaluation (Figure 1).
A Practical Guide to Investment Tax Incentives
The guide identifies key steps that policymakers and practitioners can adopt to improve outcomes at each stage, with one chapter for each. Practitioners can usefully turn to the relevant stage depending on their needs. Some stages are more relevant for policymakers – in particular the conception stage – while others are more tailored to practitioners, including those on conducting technical assessments and establishing procedures and governance mechanisms. Throughout, particular focus is given to suggested actions in cases of resource constraints.
At each stage, the guide outlines key considerations and recommendations. Each chapter starts with a brief overview of what a specific stage involves and why it is relevant for good tax incentive policymaking. A table summarises the main aspects to consider and recommended actions to improve stage outcomes. The main body expands on these aspects, discussing key challenges and trade-offs faced in practice and illustrating practical approaches to address them. Boxes in each section provide selected country examples, and footnotes provide additional clarifications on specific policy choices, implementation practices, and relevant literature. The references point to detailed policy advice for particular aspects.