Description:
This paper analyses tax incentive policies for businesses in Latin American countries to promote the discussion and review of these instruments with the aim of building tax systems that foster investment, while continuing to provide the necessary resources to attain the Sustainable Development Goals (SDGs).The amount of revenue that is lost because of tax incentives is not insignificant, in terms of both the size of the economy and total government revenues and public spending on health, education and social care. Moreover, the few cost-benefit studies that have been carried out in the region show that these incentives are not cost efficient, so there is ample space to rationalize their use and to improve their design and focus.The effectiveness of tax incentives depends, to a large extent, on good governance in their design, implementation, monitoring and evaluation, with particular importance given to transparency and accountability. Although the region has made progress in terms of measuring and publishing the fiscal cost of these incentives, there is still a long way to go to improve their governance. This document sets out guidelines in this regard.
I. Reviewing and assessing tax expenditures .-- II. Tax expenditures in Latin America and the Caribbean. What type of tax expenditures are in place? What is the value of the public resources foregone due to tax expenditures in the countries of Latin America and the Caribbean? .-- III. Tax incentives for businesses in the region. What types of business incentive are usedin the region and how effective are they? How do tax incentives for businesses in Latin Americadiffer from those in the rest of the world? What is the fiscal cost of business incentivesin the region? Do business incentives succeed in attracting investment? Do the benefits of business incentives outweigh the costs? .-- IV. Governance and the political economy of taxincentives for businesses .-- V. Policy challenges.