On November 6, 2015 on the website of the International Monetary Fund (IMF) the report: “Options for Low Income Countries' Effective and Efficient Use of Tax Incentives for Investment - A REPORT TO THE G-20 DEVELOPMENT WORKING GROUP BY THE IMF, OECD, UN AND WORLD BANK” was published.

In the Executive Summary the recommendations of the report are summarized as follows: 

·        Experience shows that there is often ample room for more effective and efficient use of investment tax incentives in low-income countries.

·        Effective and efficient use of tax incentives requires that they be carefully designed.

·        Good governance of incentives is critical for their effectiveness and efficiency.

·        The proliferation of incentives is largely a manifestation of international tax competition—which regional coordination can help mitigate,

·        More systematic evaluations are needed to facilitate informed decision making.

The conclusions included in the report can be summarized as follows:

·        This paper finds that many LICs have considerable scope to improve the effectiveness and efficiency of their investment tax incentives.

·        Making progress requires concerted action from many stakeholders.

·        Governments in LICs bear the prime responsibility for the design and governance of tax incentives

·        Society at large, including civil society organizations (CSOs) and media, play a vital role in scrutinizing government decisions, detecting malfunctioning practices, and mobilizing voice.

·        Corporations, including foreign-owned multinationals that enjoy tax incentives bear corporate social responsibility, including towards (local) communities, governments, employees, consumers and other stakeholders.

·        Supranational regional bodies have delegated responsibility from national governments to enforce commitments agreed upon in the cooperation.

·        Governments in donor countries, including those in the G20, have a responsibility in: (i) the design of their own corporate tax policies, to avoid harmful spillovers onto LICs (for example, through treaty abuse; (ii) the provision of donor aid, which itself in many cases enjoys the benefits of tax incentives offered by LICs (a practice for which the rationale is increasingly unclear, and which is being revisited by several donors);25 (iii) imposing conditionality regarding tax incentives when providing donor aid, such as meeting minimum transparency standards.

·        International organizations, such as those co-authoring this document, need to build on their established experience to support their LIC members in building more efficient and effective tax system.

An Appendix titled “Consultations” is attached to the document.

Click here to be forwarded to the report “Options for Low Income Countries' Effective and Efficient Use of Tax Incentives for Investment” as available on the website of the IMF, which will open in a new window.

Click here to be forwarded to “A Background Paper to the Report Prepared for the G-20 Development Working Group by the UN, IMF, OECD and World Bank” as available on the website of the UN, which will open in a new window.

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