Tax Incentives

Teaching taxation is not only a matter of mastering the tax codes and regulations, not anymore. Tax return filing apps, either provided by governments or companies, will provide for results that may not reflect the best interpretation of legal provisions. Working with tax policies for the digital economy has proved to be almost an ”impossible mission”: difficult to draft a proposal and even more difficult to reach a consensus.

Adopting an electronic version of the euro and granting it the legal tender status would certainly allow States to adopt more stringent policies for fighting AML and tax evasion. Even though most of the references and examples in this contribution were focusing on the EU context, similar conclusions can be drawn for other parts of the world. While new technologies such as a CBDC could represent an additional tool at disposal of tax authorities to fight tax evasion and fraud, issues concerning the digital divide and privacy shall be addressed while the debate over the design of a CBDC is still ongoing.

The Post-COVID19 path to economic recovery in Latin America and the Caribbean will demand both Domestic Revenue Mobilization measures and the promotion of domestic and foreign investment. Amid all the controversy surrounding the concession of tax incentives, the COVID-19 pandemic taught us a lesson: nothing is a sole economic issue. Public policies should address other concerns such as employment, health, environment, and education. A well-designed package of governmental measures may be a balanced proposal that includes diverse public interests to achieve optimal delivery of public goods. This post will focus on the granting of tax incentives for the digital economy in  accordance with the GATT, the GATS, and the OECD’s recommendations on harmful tax competition.

Brazil has been a challenging environment for businesses, in great part, due to the complexity and inefficiency of its tax system. Despite some controversy about the necessity of a wide and structural tax reform, the topic has been treated as a priority by the President and Congressional leaders, but the bills that currently address the tax reform have struggled to make significant progress in the Brazilian Congress. Besides, uncertainties remain as the Federal Administration may present and endorse a proposal, which could include the creation of a Digital Services Tax (“DST”).

In the tax world, this is significant because businesses react to tax policy. Tax policy, in turn, stimulates the interest of both local and international investors who are the key drivers of economic growth. Therefore, the challenges of the economic downturn will be more glaring and significant for African countries, who have a greater reliance on tax revenue from large taxpayers than more advanced economies.

The start of 2020 brought with it very perilous times in which countries around the world were forced to close their borders in a concerted effort to contain the deadly COVID-19 which claimed over 7 million lives around the world in the first half of the year. Tax bases dwindled due to job losses and a correspondent decrease in income and sales taxes. As many governments scramble to come up with inventive policies to rebalance the economy and raise tax revenue, this is a call to revisit the relevance of existing tax expenditure policies as they may become redundant in a post-pandemic era.

As evidence shows that tax incentives are not key drivers of investment and the opportunity cost of the incentives are high with dire implications for the health sector in Africa, it becomes pertinent for African countries to re-evaluate and reform their tax incentives frameworks. To achieve this, African countries need to ensure that all tax incentives are only considered after conducting a cost-benefit analysis of the potential impact of the incentives.

The financial crisis of 2007-9 and the ensuing austerity put the political spotlight on the increasingly evident defects of the international framework for taxation of transnational corporations (TNCs). This attention will be heightened by the current COVID-19 crisis, which has led to even greater levels of state expenditure, including bailouts to business, and will bring an even sharper focus on taxation.

This symposium addresses issues such as the low tax to GDP ratio in developing states, the broken social contract in these countries and the reforms needed to repair the social contract. The convener, in accepting the invitation of Afronomicslaw to host the tax symposium, called upon tax practitioners, academics, policy experts, philosophers, administrators, to offer insights on the relationship between taxation and the social contract

Based the observation from Ghana and Kenya, there is the need to improve the efficiency and effectiveness of investment tax incentives to ensure transparency, accountability, reduce associated costs, and check abuse.