(July 10, 2015)

On July 9, 2015 the OECD opened a consultation regarding an Options Paper titled: “OPTIONS FOR LOW INCOME COUNTRIES' EFFECTIVE AND EFFICIENT USE OF TAX INCENTIVES FOR INVESTMENT”. According to a press release issued by the OECD in this respect, the G20’s Development Working Group (DWG) has invited four International Organizations (IMF, OECD, UN and World Bank) to write a report on options for low income countries’ effective and efficient use of tax incentives for investment.

According to the press release, the report aims to take a fresh look at tax incentive policies in low income countries. The aim is to develop principles for the design and governance of tax incentives and to provide guidance on good practices in these areas. Since much of the pressure to offer incentives stems from an awareness of those offered by other countries, the report also discusses options for international coordination to address the risk of mutually damaging spillovers from such tax competition. Finally, a separate background document reviews practical tools and models that can help assess the costs and benefits of tax incentives, which is essential to enhance transparency and support informed decision making.

The OECD is now soliciting for comments and feedback on the draft Options Paper. According to the press release the OECD would also be interested in further case studies in low income (or other) countries and systematic evidence. According to the press release comments and feedback have to be submitted no later than August 5, 2015.

2 documents are attached to the press release: An Options Paper and a Background document.

The Options Paper, discusses a.o. the following subjects:

·       EFFECTIVENESS AND EFFICIENCY

1. Prevalence
2. ‘Effective use’
3. ‘Efficient use’

·       GUIDANCE IN THE USE

1. Design
2. Governance
3. Reform

·       INTERNATIONAL COORDINATION

The Background document elaborates on certain tools that can be used for the assessment of tax incentives. The tools on which the Background document elaborates are a.o.:

·       COST BENEFIT ANALYSIS

1. Simple model
2. Taxation and Foreign Investment
3. Welfare Assessment

·       TAX EXPENDITURE ASSESSMENT

1. Measuring tax expenditures
2. Country examples
3. Corporate income tax incentives

·       CORPORATE MICRO SIMULATION MODELS

1. Developing a model
2. Data issues

·       EFFECTIVE TAX RATE MODELS

1. Workhorse Model
2. Use in Policy Analysis
3. Tax holidays

·         DIAGNOSTIC ASSESSMENT OF GOVERNANCE

A.      Ten Principles to Promote Better Management and Administration

B.      Benchmarking Investment Incentives

For further information click here to be forwarded to the press release as issued by the OECD in this respect.

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