The Organization for Economic Cooperation and Development (OECD) recently released a report summarizing insights into how corporate tax incentives are used around the world. The findings draw from the 2024 OECD Tax Incentives Database, which focuses on emerging and developing economies.
Some of the takeaways I found interesting are:
- More than a third of all the incentives in the database target sustainable development objectives. Two-thirds of the economies offer incentives to improve the environmental impact of investments.
- Tax exemptions are the most widely used corporate income tax incentive across countries, often in Special Economic Zones, but upper middle-income countries use tax credits more frequently.
- Eligibility is often dependent on the sector or the location of activity. In other words, incentives are targeted by geography and industry. Over 50% of investment tax incentives in the database combine multiple eligibility conditions.
- The governance of investment tax incentives is complex. In many cases multiple laws, regulations and/or authorities are involved. This approach can yield benefits from bringing together different expertise and policy priorities, but it can also increase complexity and reduce transparency. Coordination is key.
A critical insight embedded in many of the top-level findings is the importance of tax incentive program design and management. The report emphasizes the importance of institutional capacity, evaluation, and incentive design, noting that the efficacy of incentives is “strongly design- and context-specific.”
For more information, please see the full report.
Source: OECD Investment Tax Incentives Database 2024 Update. Corporate income tax incentives in emerging and developing economies. OECD Business and Finance Policy Papers, No. 79.
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