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

More documents

Recommendations

Info

Table 7-3 Investment Tax Incentives in the SADC Region (2003)-- Who Does What? Country Angola Botswana DR Congo Lesotho Malawi Mauritius Mozambique Namibia Seychelles South Africa Swaziland Tanzania Zambia Zimbabwe SADC Count Count: Types of Incentive (max = 7) Tax Holiday, Full or Partial, incl. export incentives Favorable Tax Rates or Exemptions Accelerated Depreciation
TAX SYSTEMS AND INCENTIVES IN THE SADC REGION 7-9 Exhibit 7-1 Strategic Industrial Projects Program in South Africa In November 2001, the government of South Africa issued regulations defining a new regime of tax incentives for Strategic Industrial Projects (SIP) to encourage selected industrial investments and stimulate growth, development, and competitiveness. Compared to many incentive programs, the SIP is well designed. The favorable features include: • Coherent Targeting. The sectors targeted by the SIP program are not atypical: new projects in manufacturing, computer technology, and research and development. But the screening system applies a scoring system that is highly coherent with the policy goals. Point are allotted for new products or processes, for filling a critical gap in an industrial cluster, for value added of at least 35 percent, for procurement from small, medium and micro enterprises, for infrastructure provision, and for full-time jobs created per million Rand of investment. The point score determines qualifying status and the level of benefits. Job creation can account for up to 4 points on a scale of 10. • Attractive Benefits that Still Generate Revenue. The sole tax benefit is an initial capital allowance (ICA) of 50 or 100 percent, depending on the qualifying point score. The ICA is additional to normal accelerated depreciation. This is very attractive to investors and yet fiscally reasonable. That is to say, the initial allowance substantially lowers the METR for most projects, while yielding significant revenue in the medium run. SOURCE: Section 12G of the Income Tax Act, and DTI promotional documents. • Cost Limits. The program sets a ceiling (up to R600 million) on the cost of the industrial assets that may qualify for the ICA for any one project. Separately, the law sets a ceiling of R10 billion on the cumulative amount of ICA benefits that can be granted under the program. • Transparency. Under the SIP program, the qualifying criteria are explicit and substantive, applications are to be gazetted promptly, awards are to be reported annually, and revenue costs are to be monitored. • Clawback Provisions. In addition to standard provisions for canceling benefits due to noncompliance with performance or reporting requirements, the program provides for possible tax penalties in the event that benefits are disallowed. To be sure, the program has weakness. First, the Minister of Trade Industry must take into account, but not necessarily heed, the recommendations of the adjudication committee. Thus, decisions may still be discretionary. Second, the critical job criterion includes “indirect jobs,” for which figures are easy to manipulate and difficult to substantiate. Third, the benefits strongly favor projects with a rapid payback period, and projects run by companies with other industrial income against which to offset tax losses in early years. For standalone projects with a long payback period, the present value of the allowance may be small.
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 and 10:
Glossary ACT additional company tax
Page 11 and 12:
Preface The Scope of Work (SOW) for
Page 13:
PREFACE IX Export Development & Inv
Page 16 and 17:
XII EFFECTIVENESS AND IMPACT OF TAX
Page 18 and 19:
XIV EFFECTIVENESS AND IMPACT OF TAX
Page 20 and 21:
XVI EFFECTIVENESS AND IMPACT OF TAX
Page 22 and 23:
XVIII EFFECTIVENESS AND IMPACT OF T
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-
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43:
Page 46 and 47:
3-2 EFFECTIVENESS AND IMPACT OF TAX
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
3-10 EFFECTIVENESS AND IMPACT OF TA
Page 56 and 57:
Page 58 and 59:
Page 60 and 61:
Page 62 and 63:
Page 64 and 65:
Page 66 and 67: 4-2 EFFECTIVENESS AND IMPACT OF TAX
Page 74 and 75: 4-10 EFFECTIVENESS AND IMPACT OF TA
Page 95 and 96: 6. Economics of Harmful Tax Competi
Page 97 and 98: ECONOMICS OF HARMFUL TAX COMPETITIO
Page 109 and 110: 7. Tax Systems and Tax Incentives i
Page 111 and 112: TAX SYSTEMS AND INCENTIVES IN THE S
Page 115: TAX SYSTEMS AND INCENTIVES IN THE S
Page 131 and 132: Table 7-5 Elements of Tax Structure
Page 133 and 134: Table 7-5 (continued) Sheet 3 of 4
Page 135 and 136: Notes a Mozambique information Coun
Page 137 and 138: 8. Conclusions and Recommendations
Page 139 and 140: CONCLUSIONS AND RECOMMENDATIONS 8-3
Page 145: CONCLUSIONS AND RECOMMENDATIONS 8-9
Page 148 and 149: R-2 EFFECTIVENESS AND IMPACT OF TAX
Page 154 and 155: A-2 APPENDIX The present investment
Page 156 and 157: A-4 APPENDIX Democratic Republic of
Page 158 and 159: A-6 APPENDIX Government revenue in
Page 160 and 161: A-8 APPENDIX income tax payable by
Page 162 and 163: A-10 APPENDIX (though they are obli
Page 164 and 165: A-12 APPENDIX • • • Asset All
Page 166 and 167:
A-14 APPENDIX also get zero import
Page 168 and 169:
A-16 APPENDIX EPZ measure was motiv
show all

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

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?