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

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XVIII EFFECTIVENESS AND IMPACT OF TAX INCENTIVES IN THE SADC REGION ⎯ Effective monitoring mechanisms. 9. Technical assistance. In implementing the Capacity Building section of the MOU (Article 3), Member States should develop joint technical assistance and training programs to improve the analysis of tax incentive policies, as well as educational programs to help government officials and stakeholders better understand the economic and financial impact of investment tax incentives. 10. Analytical tools. The SADC tax subcommittee should develop a kit of analytical tools that can be used by Member States in analyzing the effectiveness and impact of their tax incentive programs, and by the Community in comparing tax incentives programs within and outside of the region. The tool kit should include a model for evaluating the marginal effective tax rates; information systems for monitoring average effective tax rates; guidelines for monitoring tax expenditures; and guidelines for screening applicants for selective discretionary incentives. 11. Definition of harmful tax competition (HTC). Member states should consider adding additional criteria to the conditions listed as evidence of “harmful tax competition” in Article 4.3(a) of the MOU, based on the OECD (1998) report on harmful tax practices. 12. Areas for cooperation in combating HTC. Article 4.3(b) of the MOU calls on member states to avoid “introducing tax legislation that prejudices” another member state. This broad provision should be supplemented by concrete steps to mitigate the adverse effects of HTC on the Community at large. Some of the recommendations above serve this purpose by improving policy formulation and accountability. In addition, Member states should consider the following steps toward deeper cooperation: ⎯ Negotiate bilateral or multilateral protocols or treaties for the effective exchange of information, including coordination on tax audits and investigation of tax crimes. ⎯ Establish a periodic joint review of existing tax incentive programs to evaluate compliance with any SADC agreement on tax cooperation. ⎯ Participate proactively in international forums dealing with harmful tax practices. ⎯ Jointly support the concept of an International Tax Organization with a mandate to evaluate and facilitate international responses to harmful tax practices. ⎯ Develop standards to establish clear and effective legal provisions in each country on transfer pricing, thin capitalization, and controlled foreign entities. ⎯ Jointly pursue defensive actions to minimize abusive tax avoidance schemes using cross-border tax differentials. ⎯ Initiate programs for regional fiscal transfers, similar to the structural funding arrangement in the European Community, to help poorer Member States pursue more
EXECUTIVE SUMMARY XIX constructive approaches to improving their investment climate, in lieu of aggressive tax concessions. ⎯ Finally, any effective regional agreement to mitigate the harmful effects of tax competition requires a mechanism for resolving disputes and enforcing remedial actions in response to violations.
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
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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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4-8 EFFECTIVENESS AND IMPACT OF TAX
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4-10 EFFECTIVENESS AND IMPACT OF TA
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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-4 APPENDIX Democratic Republic of
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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-10 APPENDIX (though they are obli
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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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