Business and NGOs set out joint principles for tax incentives

The CBI and three international development NGOs – ActionAid, Christian Aid and Oxfam – have published a joint briefing identifying common ground between them in relation to use of tax incentives in the developing world.

The paper, Tax Incentives in the Global South, argues that tax incentives can – when deployed in particular ways – be a useful tool in promoting decent jobs and growth.  But it also contends that too often tax incentives are used in an inefficient and/or ineffective manner, and in the worst cases are entirely redundant. In such cases incentives simply deprive developing countries of vital tax, undermining the achievement of the Sustainable Development Goals.

The organisations acknowledge that taxation remains a complex and sometimes deeply contested issue: disagreements between businesses and civil society organisations remain.  However, in other regards there is a strong degree of consensus, which is why they chose to publish this joint briefing.

The joint reflections of the CBI and the NGOs are, in summary:

  1. Incentives must be consistent with national economic policy. Whilst some tax incentives catalyse investment that leads to new jobs, this is not always the case.
  2. Incentives must be underpinned by a transparent and clear legal process with democratic oversight and political scrutiny. This will enhance the accountability of policymakers and reduce opportunities for corruption.
  3. Incentives should only be granted following clear, evidence-based economic, social and environmental impact assessments.
  4. Incentives should be subject to ongoing monitoring and evaluation by the government to ensure they continue to serve their original purpose.
  5. Incentives should be available on a level playing field to all similar companies. Company-specific tax incentives can distort investment patterns and create the potential for corruption.

The full report can be read here.

George Crozier
​CIOT Head of External Relations

Posted in: International Taxes
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