Effectiveness and Economic Impact of Tax Incentives in the SADC ...

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VI EFFECTIVENESS AND IMPACT OF TAX INCENTIVES IN THE SADC REGION OECD Organization for Economic Cooperation and Development R&D research and development RCE relative cost-effectiveness ROR rate of return SADC Southern African Development Community SCM Subsidies and Countervailing Measures (WTO Agreement) SIP Strategic Industrial Projects SL straight line (depreciation) SOW Statement of Work TFP total factor productivity TIFI Directorate on Trade, Industry, Finance and Investment (SADC) UCC user cost of capital UNCTAD United Nations Conference on Trade and Development USAID United States Agency for International Development VAT value added tax WTO World Trade Organization
Preface The Scope of Work (SOW) for this study points out that Many countries around the world, including those in the SADC region, use tax incentives to attract investment and promote economic activity. The goal is to increase investment and expand the range of economic activities. These are seen as being critical to these country’s efforts to sustain rapid economic growth and development. Given the scarcity of resources in SADC, and the region as a whole, it is crucial that governments adopt a coherent approach to tax incentives and that the tax incentives are effective. In this context, the SADC Tax Subcommittee commissioned a study of the effectiveness and impact of tax incentive programs in the region. More specifically, the SOW states that the objective of the study is to provide evidence regarding the extent of coherence of tax incentives across SADC Member States. This evidence will help guide the efforts of Member States in forming a consensus on harmonising tax incentive structures and avoiding harmful tax competition. It will also assist Member States review the tax laws and regulations and suggest the merits of centralizing them with a single ministry (such as the Ministry of Finance). The overall objective is to improve tax administration, enhance revenue collection procedures, and reduce investor confusion regarding tax incentives. This study approaches the subject from an economic perspective. Our premise is that the impact and effectiveness of any investment tax incentive depends on the context. Also, any evaluation of tax policy involves judgments about tradeoffs and uncertainties. Thus, we do not attempt to offer simple universal rules about how SADC Member States should proceed. Instead, we recognize that every country needs to establish strong capacity for undertaking its own tax policy analysis, including careful analysis of actual or proposed tax incentive programs. In this spirit, our study provides a non-technical primer on the economics of tax incentives for developing countries as a foundation for reviewing the incentive programs in the SADC region. Tax officials and managers, policymakers, and stakeholders who formulate or evaluate tax incentive programs will find the study beneficial, as will students interested in the economics of tax policy as a tool for investment promotion and economic development.
Page 1: TECHNICAL REPORT Effectiveness and
Page 5 and 6: Contents Executive Summary xi 1. In
Page 7 and 8: Contents (continued) ILLUSTRATIONS
Page 9: Glossary ACT additional company tax
Page 13: PREFACE IX Export Development & Inv
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Page 25 and 26: 1. Introduction Why should schemes
Page 27 and 28: INTRODUCTION 1-3 well administered.
Page 29 and 30: INTRODUCTION 1-5 from selective to
Page 31 and 32: 2. Taxation, Investment, and Growth
Page 33 and 34: TAXATION, INVESTMENT, AND GROWTH 2-
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3-16 EFFECTIVENESS AND IMPACT OF TA
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4-2 EFFECTIVENESS AND IMPACT OF TAX
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6. Economics of Harmful Tax Competi
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ECONOMICS OF HARMFUL TAX COMPETITIO
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7. Tax Systems and Tax Incentives i
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TAX SYSTEMS AND INCENTIVES IN THE S
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Table 7-5 Elements of Tax Structure
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Table 7-5 (continued) Sheet 3 of 4
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Notes a Mozambique information Coun
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8. Conclusions and Recommendations
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CONCLUSIONS AND RECOMMENDATIONS 8-3
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R-2 EFFECTIVENESS AND IMPACT OF TAX
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A-2 APPENDIX The present investment
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A-6 APPENDIX Government revenue in
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A-8 APPENDIX income tax payable by
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A-12 APPENDIX • • • Asset All
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A-14 APPENDIX also get zero import
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A-16 APPENDIX EPZ measure was motiv
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