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

TAX SYSTEMS AND INCENTIVES IN THE SADC REGION 7-17
Figure 7-2
Illustrative METR with Standard Tax System and with Tax Incentives
Angola
Botsw ana
DRC
Lesotho
Malawi
Mozambique
Mauritius
Nam ibia
South Africa
Seychelles
Sw aziland
Tanzania
Zambia
Zimbabwe
0.0
0.0
0.0
0.0
1.4
3.1
5.0
4.3
10.1
12.6
15.8
14.5
20.9
28.9
34.5
33.7
37.7
32.9
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0
7.4 Successes and Failures
35.8
40.7
44.6
46.3
Marginal Effective Tax Rate (METR)
(Project Scenario 4 -- see Table 7-4)
Experience with investment tax incentives in the SADC region is distinctly mixed. In some
circumstances, tax incentives have helped to stimulate important investments:
•
•
•
•
The clearest and best known example is the Mauritius Miracle, where generous tax benefits
are widely regarded as having played an essential part in attracting investments that
48.8
generated tens of thousands of jobs and transformed the economy.
Lesotho has had considerable success in creating tens of thousands of taxpaying jobs in
export manufacturing, by applying a simple 15 percent company tax rate for this sector,
combined with the AGOA provision that allows low-income African countries to have
duty-free access to the American market for garments made from third-country fabrics.
Analysts generally agree that tax incentives were essential in bringing the giant Mozal
aluminum smelter into Mozambique as the first major investment since the end of the civil
war and the introduction of democracy.
In South Africa, the MIDP program is widely regarded as a success in stimulating
investment and rapid growth of automotive exports.
52.3
54.9
56.2
60.1
65.5
Incentive
Standard