WELL GOVERNED TAX EXEMPTIONS

Well designed tax exemptions can benefit tax systems, alleviate the tax burden carried by the poor and strengthen certain sectors of the economy. However, they are very often misused and mismanaged and cause huge losses of tax revenues. This category focuses on the process of granting tax exemptions and on the policies that are in place to ensure the transparency of the information related to the tax exemptions. The revenue lost due to tax exemptions is examined within the category of sufficient tax revenues.
  • 2015
  • 2016
2015 UGANDA SENEGAL BANGLADESH PAKISTAN
WELL GOVERNED TAX EXEMPTIONS
7
7
2
6

Uganda seem to be on the right path in creating a transparent framework for managing the tax exemptions. Discretionary exemptions were abolished in 1996 and information about the beneficiary companies and lost revenues is published. However, Uganda's revenue forgone to tax exemptions remains high (2% of GDP in 2013). 

Since 2008, Senegal publishes information about tax exemptions and the revenues lost, which makes the system very transparent. However, improvements are still needed in terms of timely publication of the data. To improve the management of the tax exemptions, they should be subject to a parliamentary oversight.

Curbing tax exemptions and making sure that all existing exemptions are approved by the Parliament and open to public scrutiny are extremely necessary in Bangladesh. The key to more effective management of tax exemptions is likely to lie in reduced discretionary powers, total transparency about the beneficiaries of the tax exemptions and in a stronger mandate for the revenue authority to implement and monitor all incentives and exemptions. 

Pakistan has an ambiguous and unfair constitutional structure with prevailing tax exemptions and preferential treatment given to specific sectors and elites of the society. The influential class of society create a legal space for exempting their income or set the tax rates of their own choices as a result of bilateral negotiations with the government, which ultimately burdens the poor. Fortunately, majority of such exemptions is to be withdrawn by 2016, which will have a positive impact on the tax system in Pakistan.

0-2
3-4
5-6
7-8
9-10
unfair
fair
    • Governance
    • Transparency
2016 UGANDA SENEGAL BANGLADESH PAKISTAN
WELL GOVERNED TAX EXEMPTIONS
7
7
2
6

Uganda seem to be on the right path in creating a transparent framework for managing the tax exemptions. Discretionary exemptions were abolished in 1996 and information about the beneficiary companies and lost revenues is published. However, Uganda's revenue forgone to tax exemptions remains high (2% of GDP in 2013).

Since 2008, Senegal publishes information about tax exemptions and the revenues lost, which makes the system very transparent. However, improvements are still needed in terms of timely publication of the data. To improve the management of the tax exemptions, they should be subject to a parliamentary oversight.

Curbing tax exemptions and making sure that all existing exemptions are approved by the Parliament and open to public scrutiny are extremely necessary in Bangladesh. The key to more effective management of tax exemptions is likely to lie in reduced discretionary powers, total transparency about the beneficiaries of the tax exemptions and in a stronger mandate for the revenue authority to implement and monitor all incentives and exemptions.

Pakistan has an ambiguous and unfair constitutional structure with prevailing tax exemptions and preferential treatment given to specific sectors and elites of the society. The influential class of society create a legal space for exempting their income or set the tax rates of their own choices as a result of bilateral negotiations with the government, which ultimately burdens the poor. Fortunately, majority of such exemptions is to be withdrawn by 2016, which will have a positive impact on the tax system in Pakistan.

0-2
3-4
5-6
7-8
9-10
unfair
fair
    • Governance
    • Transparency