ATI members share experiences, challenges and best practices in the design of tax incentive regimes

On 17 September 2020, the Addis Tax Initiative (ATI) Consultative Group 3 hosted a webinar to discuss the findings of the ATI brief “Perspectives from partner countries on the design of tax incentive regimes”.

Representatives of the Ministries of Finance from Ghana, Malawi, and the Philippines -  that participated in the publication - presented the design of their national tax incentive regimes. In addition, the Platform for Collaboration on Tax (PCT) Secretariat and Save the Children Kenya discussed challenges and good practices to improve effectiveness, transparency and accountability of tax incentive regimes. The webinar was moderated by Mr. Mark Montgomery, Co-Coordinator ATI Consultative Group 3, and attended by 45 representatives of ATI partner countries, development partners and supporting organisations. A brief summary of the webinar discussions is available here.

Within ATI Consultative Group 3 - which has been engaged in implementing activities to promote policy coherence for development - tax incentives have been a frequent topic of discussion. Many countries grant tax incentives to attract investment; however, available evidence suggests that they can be ineffective due to weaknesses in design, opacity in granting and administrative challenges. On this basis, the ATI Consultative Group 3 has been working on a brief on tax incentive regimes in ATI partner countries. The brief provides an overview of good practices in the design of tax incentive regimes based on lessons learned from the pilot countries, which were presented during the webinar.

The main findings of the brief were presented by its author, Mr. Mustapha Ndajiwo, Executive Director of the African Centre for Tax and Governance, and was followed by inputs from ATI partner countries which volunteered to participate as case studies. With presentations by Mr. Daniel Nuer (Head of the Tax Policy Unit, Ministry of Finance, Ghana), Mr. Kenneth Mutapa (Director of the Revenue Policy Division, Ministry of Finance, Malawi) and Ms. Juvy Danofrata (Director of the Department of Finance, the Philippines), the webinar allowed participants to gain first hand insights into the perspectives of partner countries policy-makers. In addition, Ms. Ashima Neb, representative of Platform for Collaboration on Tax (PCT) Secretariat, presented the PCT toolkit on tax incentives and Mr. Ibrahim Alubala from Save the Children Kenya provided a civil society perspective on the design of tax incentives.

Overall, the key takeaways of the discussion include the importance of ensuring that the design of tax incentives provides clarity in terms of intended objectives, non-discrimination and transparency. The adoption of tax incentives should be accompanied by a participatory and transparent process. Most notably, members of parliament and external stakeholders, particularly CSOs, shall be actively included in discussions on granting tax incentives. There is need for improvement in institutional coordination among different government agencies and data collection. Furthermore, better design requires effective monitoring and evaluation, with insertion of sunset clauses and claw back provisions.

The Secretariat of the ATI thanks the ATI members for their active participation and engagement in the discussions. For more information on upcoming webinars, please refer to the ITC DRM Calendar and follow the ITC on Twitter and LinkedIn.