Assessing tax relief from targeted investment tax incentives through corporate effective
tax rates
Methodology and initial findings for seven Sub-Saharan African countries
Corporate tax incentives reduce investment costs for businesses, which may affect
investment and location decisions. They apply through different designs and interact
with countries’ standard tax systems, often making it difficult for tax policy makers
and researchers to compare their generosity and assess their impacts across countries.
This paper develops a methodology to calculate forward-looking corporate effective
tax rates (ETRs) summarising tax relief from investment tax incentives into comparable
indicators. It presents ETR indicators for seven Sub-Saharan African countries. Empirical
results show that tax incentives substantially lower corporate taxation across these
countries. On average, tax incentives reduce ETRs by 30% in the food and automotive
industries compared to the standard tax treatment. ETRs often differ among taxpayers
in a same sector and country - by up to 55%. The most generous tax treatment is typically
offered within Special Economic Zones, where tax incentives can reduce ETRs to near
zero.
Available from September 22, 2022
In series:OECD Taxation Working Papersview more titles