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

CONCLUSIONS AND RECOMMENDATIONS 8-7
the submission of normal tax returns and other appropriate forms to report the use of
special deductions, allowances, credits, rebates, remissions, or other tax benefits.
4. Monitoring mechanisms. Member states should take seriously the need to establish effective
systems for monitoring the implementation of projects that receive discretionary fiscal
benefits contingent on performance criteria, at least on a random audit basis. Failure to
monitor encourages false applications, places public revenue unduly at risk, renders
useless any penalty or sanction clauses, and makes it virtually impossible for the
government or the public to ascertain the effectiveness of the tax incentive programs.
8.4 Capacity Building
TECHNICAL ASSISTANCE
To implement the Capacity Building section of the MOU (Article 3), Member States should
establish intraregional technical assistance and training programs for improving the analysis
of tax incentive policies. Member States should also develop educational programs to help
government officials and stakeholders better understand the economic and financial impact of
investment tax incentives.
ANALYTICAL TOOLS
The SADC tax subcommittee should develop a standard kit of analytical tools that Member
States can use to analyze the effectiveness and impact of their tax incentive programs, and for
the Community to use in comparing tax incentives programs within and outside of the region.
The tool kit should include,
1. A model for evaluating the marginal effective tax rates under different regimes and
situations.
2. Data systems for monitoring average effective tax rates by sector and size of firm.
3. Guidelines for monitoring and disclosing tax expenditures.
4. Guidelines for screening applicants for selective discretionary incentives, to maximize the
cost-effectiveness of incentive programs throughout the region.