United nations of tax incentives

part of this item is not just about the rationale for a 
proposed tax incentive, but also about why particular stakeholders (for 
instance, ministries) should be allocated particular roles in developing 
the policy.
The manner in which a particular problem can be addressed 
through the tax system is limited by reference to the taxes imposed by 
that system. This is the 
which taxes
part of the item. It may be obvious 
that a particular problem can only be addressed through a tax incentive 
in a particular tax, but in other cases, the government may have a number 
of taxes that could be used for incentive purposes. So there needs to be 
consideration and then clarity regarding which taxes are to be used to 
develop the tax incentive. If more than one tax is to be the target, then 
there also needs to be clarity as to the way in which the adjustments to 
each tax should integrate so as to best address the problem.
1 .2 
Make the economic and social case (including forecasts, 
projections, externalities)
This is a most critical part of developing the policy underlying 
a tax incentive. It is also a part that is often done poorly and leads 
to confusion and dissatisfaction with particular tax incentives. A 
tax incentive provides particular taxpayers with special beneficial 
treatment in order to encourage certain behaviour that is expected 
to produce some benefit to the public that is greater than the cost of 
providing the incentive. There is no substitute for putting figures to 
these costs and benefits and outlining how those figures are calculated 
and on what assumptions.
In some cases, the incentive is just a question of improving 
the overall financial situation. For example, reduction of taxes in a 
particular sector may increase activity in that sector such that more 
taxes are actually raised from that sector under a lower rate than under 
a higher rate. In other cases, the tax incentive may not be simply targeted 
at the overall financial situation, but may involve other social benefits, 
for instance clean water, education, revamping deprived areas, etc.

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