This document was published by the Platform for Collaboration on Tax (PTC).
‘Tax incentives’—by which is meant here tax provisions that offer preferentially favorable treatment to some subset of taxpayers with the intention of promoting particular activities—can serve useful purposes. But their provision runs two types of risk: of compromising tax revenue and distorting behavior without generating more than offsetting social benefit; and of creating governance problems, including of abuse and corruption.
The principles set out here are intended to help policymakers identify and secure any potential social gains from tax incentives while avoiding their pitfalls. They are aspirational. Few countries, if any, fully comply with all of them. Many face capacity constraints which make meeting even some of the most basic of these principles challenging—which highlights the importance of carefully assessing the design and implementation of such measures in light of available capacity. For all countries, however, a clear view of what should be aimed for can provide a firm and actionable basis for progress.
There are six broad principles, each with sub-principles. They span the life cycle of a tax incentive: Justification, Design, International Considerations, Legislation, Implementation and Evaluation. Accompanying Remarks elaborate on the principles, and point to guidance material that provides detail and examples which may be useful in moving towards their fuller realization.
1: JUSTIFICATION
2: DESIGN
3: INTERNATIONAL CONSIDERATIONS
4: LEGISLATION
5: IMPLEMENTATION
6: EVALUATION
Read the full document HERE.