Tax Incentives in National Investment Laws
Bridging the gap between tax and investment policy-makers
Every year, governments across emerging and developing economies forgo significant tax revenues through incentives embedded in national investment laws, with little evidence of their broader economic and social returns. This report maps their design, legal structure, and governance arrangements across 105 national investment laws to support better coordination among the institutions that shape these policies and help countries attract quality investment.
Key Findings
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Tax incentives dominate the incentive landscape in investment laws. They appear in 94% of laws that provide incentives, consistently across regions.
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Investment promotion agencies sit at the centre of both the design and the administration of tax incentives. Ministries of finance, by contrast, remain at the margins; their role is shaped more by administrative habits than by formalized coordination.
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Tax incentives rarely operate within a single legal framework. In many countries, investors can benefit from incentives across multiple regimes. Governments are approaching greater centralization to improve transparency, coherence, and alignment with development strategies, but progress is uneven.
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Fewer than half of investment laws granting tax incentives mandate periodic review. While tax authorities often produce tax expenditure estimates to gauge revenue foregone, these are not consistently shared with or integrated into the work of investment authorities.
For decades, tax incentives have been a central feature of investment promotion strategies across the developing world. National investment laws have become the favoured vehicle for granting these incentives, particularly in least developed countries, where they form the primary legal basis for tax incentives in more than half of all cases.
Despite their prevalence, little attention has been paid to how these incentives are governed: Who decides their design? Who grants them, and on what basis? How do they interact with other instruments granting tax incentives? Who monitors whether they achieve their stated objectives? And what institutional arrangements exist to ensure accountability when they do not?
This report sets out to answer those questions. Drawing on a survey of 105 investment laws from Africa, Asia, and Latin America and the Caribbean, complemented by interviews with government officials, the report maps the current landscape of tax incentives in investment laws across emerging markets and developing economies: their prevalence, their design, their interaction with other legal instruments, and the governance structure that surrounds them.
By examining how tax incentives are embedded in investment laws and the governance challenges that arise, the report aims to foster a more coordinated approach between institutions that promote investment and those that safeguard public revenue. Ultimately, it seeks to support a shared understanding of the role that tax incentives should play in attracting sustainable investment, building a common vision that promotes quality investment while contributing fully to domestic resource mobilization.
Participating experts
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