United nations of tax incentives

Part II: Practical Aspects
As noted, it is important to provide for monitoring the 
effectiveness of a tax incentive, that is to say to ensure that it continues 
to meet its objectives. Inevitably, this is a financial matter and so a 
matter for the MoF. However, the information that the MoF needs 
in order to fulfil its role as evaluator will be in the hands of other 
government agencies. For example, information about the cost of the 
tax incentive in terms of forgone revenue will most likely be in the 
hands of the tax administration.
Information about the impact of the tax incentive, such as in 
terms of increases in activity, is more likely to be in the hands of the 
sector regulator. In any case, there is a need to be sure that the tax 
administration and sector regulator are collecting the information 
that the MoF needs for evaluation purposes, and that they have a legal 
right to do so.
2 .2 
Co-ordination between authorities (need for 
memorandums of understanding, joint audits)
In any case, there may be a need for the tax administration to coordinate 
with the sector regulator and it is appropriate and important that 
the manner of coordination is formally recorded. This is commonly 
done through agreement between the relevant agencies in the form 
of a Memorandum of Understanding. The form and contents of any 
Memorandum should be considered during the design process of the 
tax incentive. This is because that content needs to be balanced with 
the manner in which the legal implementation of the tax incentive 
assigns roles and responsibilities.
As a rule of thumb, where it is important that the taxpayer has 
clarity regarding identity of the responsible authority for determining 
a particular matter, that identification should be provided by law. 
Things that are purely a matter of the internal workings of government 
should be in a Memorandum of Understanding, which is a private 
document. For example, the law needs to be clear about which public 
officers can participate in an audit of compliance with a tax incentive. 
Clearly the tax administration should be involved, but often it is 
appropriate or necessary for public officers from the sector regulator 
to also be present. The potential involvement of public officers from 
the regulator should be clearly specified in law. However, the manner 

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Design and Assessment of Tax Incentives
in which the tax administration and the sector regulator coordinate