Effectiveness and Economic Impact of Tax Incentives in the SADC Region

2004
 
The use of tax incentives in developing countries has been very popular and very controversial for decades. Although such incentives undoubtedly affect investment decisions in some circumstances, it is not clear that the benefits outweigh the costs. Despite the controversy, every SADC country offers investment tax incentives of one form or another. Many governments in the region face pressure to sweeten these programs, to compete with tax breaks offered elsewhere. At the same time they are pressed to strengthen revenues, to finance essential public goods and services. The challenge is to understand the conditions and the policy design features that determine whether tax incentives in the SADC region are likely to deliver substantial and sustainable net benefits in a particular context. The purpose of this study is to help tax officials, policymakers, and other stakeholders in the region meet the challenge.

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