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Action Aid Welcomes Reduction In African Tax Reliefs

by Lorys Charalambous, Tax-News.com, Cyprus

22 June 2016


Action Aid has released a new report on the proliferation of tax breaks in East African countries, noting a small fall in value-added tax expenditures.

The report says: "Governments have taken some positive steps to reduce tax incentives, especially those related to VAT, which is increasing tax collections and providing vital extra revenues that could be spent on providing critical services."

Specifically, it noted that Tanzania introduced a new law in 2015 to reduce VAT exemptions. However, the organization called for further efforts to reduce the incentives offered to foreign investors. This law will increase revenues by about USD500m, the report estimates.

Finally, the report noted that Uganda, too, has taken steps to reduce VAT exemptions, with tax collections expected to increase by 0.7 percent of GDP. However, the nation was also encouraged to rein in corporate tax exemptions.

The report – an update to a 2012 study – urges East African countries to avoid a race to the bottom in providing ever greater tax breaks to foreign investors, warning that such has eroded their tax bases.

TAGS: tax | value added tax (VAT) | tax incentives | law | Uganda | tax breaks | Tanzania | services | Africa

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