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


Published: 15 October 2015


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The Platform for Collaboration on Tax – a joint initiative of the IMF, OECD, UN and World Bank Group – has undertaken, at the request of the G20, the development of a series of "Toolkits" to help guide developing countries in the implementation of policy options for issues in international taxation of greatest relevance to these countries.

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 Platform partner 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 studies, the IOs prepared this toolkit aiming to take a fresh look at tax incentive policies in low income countries. The toolkit offers guidance on the design and governance of tax incentives and suggests good practices. Since much of the pressure to offer incentives stems from an awareness of those offered by other countries, the toolkit also discusses options for international coordination to address the risk of mutually damaging spillovers from such tax competition.

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


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