DRM Academy
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DRM Academy CoP
The DRM Academy Community of Practice (CoP) is a place to connect online, engage in discussion, access resources and hear insights from international experts. This CoP will host regular webinars with policymakers and international experts, featuring updates on countries’ reform journeys and actionable insights on tax incentive reform. This CoP will serve as the main hub for the DRM Impact Program.
About DRM Impact Program
The DRM Impact Program is one of twelve impact programs offered across the World Bank Group. With the mantra of learn – adapt – scale, impact programs are designed to deploy proven solutions to key development challenges in new contexts. This platform will facilitate learning from challenges and successes directly from each other. As frontline policymakers, you are best placed to share insights on how to overcome obstacles to meaningful policy reform. With the collective experience of over 25 countries, World Bank Group experts, and our colleagues from think tanks, regional organizations, and research institutes, we hope to facilitate open discussions on how to overcome the technical and political economy challenges that stand in the way of effective reform.
We invite you to reflect on areas where you wish to pursue reforms as a part of this agenda. Be it to the targeting of tax incentives, the rules and procedures around their management, or in undertaking evaluation of their costs and benefits to inform better policy design, this community is here to support you. For some of you, this process will culminate in an action plan that will allow us at the World Bank Group to better focus our support in the short- to medium-term. For others, we hope that the DRM Impact Program provides the tools, resources, and community to support you to strategically think through the actions or reforms you might wish to pursue in future.
All events
Reports and related links
Tax Incentive Principles
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.
Potential Reforms
Justification
1. Undertake structured, quantitative ex-ante assessments to understand whether the expected social benefits of potential new incentives outweigh expected social costs
2. Evaluate the use of tax incentives against alternative approaches to promote the desired outcome
3. Ensure that the objectives of tax incentives are clear and grounded in evidence of market failures or in support of clear development priorities.
Design
1. Improving the targeting of existing incentives, including adopting cost-based incentives in place of profit-based incentives
2. Limiting revenue loss, including repeal of ineffective/inefficient incentives, or incorporating sunset provisions on existing incentives
3. Evaluating the potentially unanticipated or unwelcome side effects of incentives during the design phase
International Considerations
1. Reform to incentives that enhance their consistency with international commitments
2. Reform to incentives to account for tax rules and strategic responses elsewhere
3. Assessment of whether there is potential, through international cooperation, to limit the risks that incentives can create
4. Assessment of the extent to which there is an impact of incentive policies on other economies
Legislation
1. Creation of a formal procedure for the Ministry of Finance to review new tax incentive policies before enacting
2. Drafting clearer incentive legislation that minimizes discretion, and incorporates robust governance safeguards
3. Adopting regulations that stipulate that the law-making body or Parliament should approve incentives
4. Consolidating all incentives in the main body of tax law
5. Establishing a formal consultation process with the private sector and other key stakeholders during the process of policy formulation
Implementation
1. Adoption of a tax incentives (tax expenditure) governance framework
2. Appropriately empowering the revenue authority to effectively administer incentives
3. Ensuring that the compliance obligations are adhered to by beneficiaries of incentives
4. Establishing mechanisms to ensure voluntary compliance with tailored service, assurance, and enforcement strategies designed for the beneficiaries of tax incentives
5. Establishing rules and institutional arrangements to ensure interagency cooperation and the provision of data needed for implementation, monitoring and assessment
6. Improving data collection, for instance by introducing a legal requirement for beneficiaries of tax holidays to submit tax returns
Evaluation
1. Regular estimation and publication of revenue forgone from tax expenditures, including enhancements to the modelling or analysis contained within existing reports
2. Establishing a program for periodic, credible, and public evaluation in incentive legislation
3. Considering the behavioral effects and external spillovers of incentives in evaluations
4. Drafting of evidence-based proposals to reform ineffective, inefficient or inequitable tax incentives
