United nations of tax incentives

3 .2 
Detail (regulation, rulings, agreements)
It is unrealistic to believe that tax laws can cover in primary legislation 
all scenarios they need to address. Tax laws can (and do) set the 
general rules applicable, but tax laws always need detailing in lower 
level rules. This is also typically true of the legal rules implementing 
tax incentives. There needs to be planning and provision for making 
lower level rules for implementing a tax incentive. There are different 
options available in this regard, with different attributes that need to 
be considered. In all cases, there needs to be clarity that the subsidiary 
rules are only effective to the extent that they are consistent with the 
primary legislation.
Detail for a tax incentive can be provided through subsidiary 
legislation such as regulations. The benefit of this mechanism is that 
(presuming there is consistency with the primary legislation) subsidiary 
legislation is binding on both the taxpayer and the tax administration. 
Different countries have different procedures for the passage of 
subsidiary legislation. Sometimes it is enough that the legislation is 
authorised by the relevant ministry and published in the government 
gazette. In other cases, the subsidiary legislation must go through the 
government legal drafting department (such as the Attorney General’s 
office), be tabled in Parliament and then be published in the gazette. 
The flexibility with which subsidiary legislation can be implemented 
has an impact on its utility for purposes of detailing a tax incentive.

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49
Part II: Practical Aspects
Most tax administrations have power to issue rulings 
(practice notes, circulars, statements, etc.) that bind them to particular 
positions or interpretation of tax laws. This is a particularly flexible 
method of detailing tax rules (including those for tax incentives), as 
there is usually less formality than in the case of subsidiary legislation 
(such as no requirement to lay before Parliament or publish in the 
government gazette).
Tax administration rulings may be public, in which case all 
taxpayers can rely on them. They may also be private, in the sense that 
they are not public (and so can deal with sensitive matters) and so only 
the taxpayer to whom they are issued can rely on them. The downside 
is that rulings only bind the tax administration and not the taxpayer.
It is possible for the detailed implementation of a tax incentive 
to be provided for in private agreements between the government 
and the taxpayer. This is the same mechanism as discussed under the 
previous item and the discussion at that point is again relevant.
Whatever the mechanism through which a tax incentive 
is detailed, again there needs to be careful planning. Mention has 
already been made that the location of the primary legal rules for a tax 
incentive determines which ministry can make secondary legislation 
with respect to the tax incentive. This can raise issues for the tax 
administration where the incentive is in sector legislation.
Similarly, the tax administration typically has a limited power 
to make binding rulings, that is to say limited to matters covered by 
the tax laws the tax administration is authorised to administer. It 
would be particularly strange to find a tax administration issuing a 
tax ruling under a power in a tax law under the control and direction 
of the MoF with respect to a tax incentive in sector legislation under 
the control and direction of a different ministry.