This technical note sets out the essential elements to effectively manage tax incentives in developing countries, emphasizing the important role that revenue authorities must play in preventing abuses and revenue leakages. The note presents considerations for a risk-based compliance program on tax incentives that combines various supportive, preventative, and corrective practices and approaches. It also delineates key enablers, such as a whole-of-government approach, robust transparency and accountability practices, and a modern compliance risk management framework.
Authors
Miguel Pecho, Stoyan E Markov, Philip R Wood, Rachel Auclair, Fernando Velayos
- DOI
- https://doi.org/10.5089/9798400289590.005
- ISBN
- 9798400289590
- ISSN
- 2075-8669
- Issue
- 007
- Pages
- 30
- Published in
- United States of America
- StockNumber
- TNMEA2024007
- Volume
- 2024
Table of Contents
- Cover 1
- Title Page 3
- Copyright 4
- Contents 5
- Chapter I. Introduction 7
- Chapter II. Key Enablers 9
- A. Institutional Arrangements and Governance 9
- B. Transparency, Accountability, and Reporting 10
- C. Policy Design and Legislation 11
- D. Compliance Risk Management 12
- Chapter III. Developing a Risk Differentiation Framework for Managing Tax Incentives Risks 15
- Chapter IV. Considerations for a Compliance Program on Tax Incentives 17
- A. Enrollment in Tax Incentives Must Be Subject to the Approval of Revenue Authorities 17
- B. To Ensure Voluntary Compliance through Self-Assessment, Revenue Authorities Must Provide Support to Recipients of Tax Incentives and Ensure Tax Certainty 17
- C. Filing and Reporting Obligations Should Never Be Waived for Recipients of Tax Incentives 18
- D. It Is Important to Manage Import-Based Tax and Duty Relief Requests at the Time of the Clearance of Goods 19
- E. Traceability Mechanisms of Transactions, Assets, and Inventories, and Collection of Third-Party Data Enhance the Effectiveness of Compliance Approaches 19
- F. Revenue Authorities Must Build Broad Knowledge on the Recipients of Tax Incentives Before Embarking on Reviews, Audits, and Investigations 20
- G. A Graduated Enforcement Approach Is Desirable when Planning Reviews, Audits, and Investigations on Tax Incentives 21
- H. Weigh the Convenience of Adopting Assurance Approaches for Those Recipients That Demonstrate a Sound Level of Disclosure, Cooperation, and Engagement 22
- I. Revenue Authorities Must Follow a Complete Recipients’ Due Diligence Process when a Tax Incentive Comes to Its End 23
- Chapter V. Conclusions 24
- Appendix 1. Enrolling Applicants in Special Economic Zones 25
- Appendix 2. Digital Accounting Platform in Brazil 26
- Appendix 3. Assurance Approaches Planned for Tackling Customs Risks in Fiji 27
- References 28
